How Much Has My Silicon Vallley Home Value Dropped in the Downturn?

Silicon Valley home values are dropping, but it may not be as bad as you think. If you only read the headlines, you might think that the value of homes across the south bay has dropped 41% in the last year.  For example, Friday’s print edition of the San Jose Mercury news screams in its headline, “Median Home Price Dives 41%”. ( The online edition had a milder headline, Santa Clara County median home price plunges, sales rise.)

Have home prices really dropped 41% from a year ago?  No. (But it is critically important to know how much values are dropping, especially if you put your home on the market.)  The median home price is the number at which half of all sales were higher and half lower than that number.   For instance, if you had three homes sell, one at $300,000, one at $500,000 and one at $501,000, the “median home price” would be $500,000.   If you had five sell at $100,000 and three sell at $2,000,000, the median would be $100,000. You can see the problem.

What the median home price does explain is market heat, or where the market is most active.  Often, the median price tracks home values – but not always. And this is one of those times.

So how much value has been lost? It will vary from area to area, sometimes even block by block.  Loss in value will be tied to when either you bought the home or when your area was at its peak.  For many parts of San Jose and Silicon Valley, that peak was about 2 years ago, late 2006 to early 2007.

The best way to know what home values are doing is to study the comps, or the comparable home sales. It is easiest to do this in a tract neighborhood (we have no shortage of those in Santa Clara County).

For example, in the South San Jose zip code area of 95138, I took a sample tract home floorplan of 1355 square feet and charted it back over the last ten  years.    Here’s what the average price per SF was for that floorplan per year:

2009   $321.03  just one so far – $435,000
2008   $362.45   av sales price $483,870
2007   $470.55  av sales price $637,595
2006   $492.15  av sales price  $666,863
2005   $453.26  av sales price  $614,167
2004   $407.06  av sales price $551,566
2003   $332.39  av sales price  $450,388
2002   $334.46  av sales price $453,193
2001   $304.80  av sales price  $413,004
2000  $318.25  av sales price  $431,288
1999   $225.09  av sales price $304,996
1998   $205.35  av sales price  $278,249