SILICON VALLEY, CA -- On Silacci Drive in Campbell, a 1,362-square-foot, three-bedroom, two-bath home was on the market eight days at $419,000 before it sold for $507,000.

Initially listed at $650,000, a 1,786 square-footer with four bedrooms and two baths, on Cupertino's Farallone Drive, sold for $825,000 in 10 days.

And remember the unsightly Palo Alto home that sold last year for a cool million more than asking? The home's final asking-to-sales price ratio pales in comparison to at least one more recent sale.

A 3,150-square-foot-home with four bedrooms and three and a half baths, on Palo Alto's Portola Avenue, listed at about $2.7 million for 10 days until it sold for $4.3 million -- a cooler $1.6 million more than asking.

Silicon Valley's housing market is out of control.

In an unprecedented market twist, even for Silicon Valley, most homes sell for more than list price.

That's an about-face from a year ago, when anecdotal evidence of overbids fell flat in the face of statistics.

Sizzle

Now, however, what's likely the nation's hottest housing market is also fast becoming the land of the haves and have-nots.

This year, from Jan. 1 to Feb. 14, more than 60 percent of the few homes sold and closed went for more than asking, according to statistics from Richard Calhoun, resident number cruncher for the Santa Clara County Association of Realtors.

Of the 268 homes sold thus far this year, 48 sold below asking, 55 sold at asking and a 164 sold for more, Calhoun said on Valentine's Day.

They aren't selling for a mere few thousands of dollars more than asking. Seventeen of them sold for 25 percent or more than the asking price -- one as high as 60 percent more, said Calhoun, broker owner of Creekside Realty in San Jose, CA who uses spreadsheet software to crunch data from R.E.InfoLink, the area's multiple listing service provider.

Provided the sizzle doesn't fizzle, the market's next milestone could be homes that sell for double asking.

"If I had a house in Silicon Valley, I'd list it at twice, maybe three times my wildest dreams," said Michael Carney, executive director of the Real Estate Research Council at California State Polytechnic University in Pomona.

"The fact that people are offering more than REALTORS and sellers are asking means they are underestimating the market. No one could have forecast such a market or thought we'd have prosperity for this long," said Carney. His council produces the quarterly Real Estate Report for Northern and Southern California. It tracks true home values from repeat sales of the same homes.

The Carrot

Lured by a booming, technology-driven economy offering jobs with stock-option laden compensation packages, people have been flocking to Silicon Valley since the mid-1990s. During the same period home inventories have slipped to record lows. Right now, in a market of 1.7 million residents and 300,000 owner-occupied homes, only about 750 homes or so are on the market at any given time.

"It is becoming basically an unaffordable place to live," said Calhoun.

That's an understatement.

Tolerance for traffic tie-ups, long commutes and expensive homes could be coming to an end.

For the first time in five years, more people are leaving Santa Clara County than are moving in, according to a recent report from California's Department of Finance.

There were 17,484 new residents in Santa Clara County last year, but the population rose only by 16,200, because 1,284 more people moved out of the county than moved in.

Three out of four Silicon Valley residents consider the lack of affordable housing a major problem, while only one in four people nationwide have the same concern, according to a recent Knight Foundation study.

Given market conditions, however, Silicon Valley's housing market is doing what it's supposed to do, say economists.

"That's what will happen when you have money floating around and no new housing. The result is a kind of mania. Let's hope it won't end in a panic. That's the concern," says G. U. Krueger, an economist at the California Association of Realtors.

It's not accurate to characterize all of Silicon Valley's housing market as out of control, says Penny Pompei, executive vice president of the Silicon Valley Association of Realtors.

Countywide, the median price of all housing (single-family, condos, manufactured homes) was "only" $399,000 in January, up from $323,888 in January 1999, according to the Santa Clara County Association of Realtors. The single-family medium price is $449,000, up from $377,638 a year ago.

The January numbers were just shy of twice what homes sold for after the market hit bottom early in the 1990s.

"The sales-price-greater-than-listing-price issue is very area-sensitive. It is clearly too few houses on the market and too many buyers. It seems to be driven a great deal by the quality of the schools in a particular area as much as anything," she said.

Much of the more-than-asking activity began a year or more ago and continues to flourish on "The Peninsula," in cities of affluence, including Palo Alto (home of Stanford University), Atherton, Hillsborough, Los Altos and Los Altos Hills. The cities are all north of San Jose, Santa Clara County's (Silicon Valley) county seat.

However, as inventories have dwindled, homes selling for more than asking are not uncommon in virtually every city in the county, as well as adjacent counties, San Mateo, Alameda, San Francisco and elsewhere throughout the San Francisco Bay Area.

To say it's merely a "quality of schools" issue overlooks another more disturbing trend. A home buying generation that has never experienced a bear market is flush with disposable income.

"It's Funny Money. It's 'I want a house. I want a bigger house. I don't care what it costs. My stocks are going through the roof.' As long as they have marginal accounts to work off, they are going to buy homes," said Alexis McGee, vice president of Sacramento-based Foreclosures.com.

Fortunately, some home buyers make the purchase to wisely diversify their portfolios with an investment in a home -- perhaps the largest single investment many will ever hold. A home is shelter from the elements, but it also provides a tax shelter and throws a net over the rental money pit.

The Have Nots

Silicon Valley streets, however, are not paved in gold.

In yet another bizarre twist of Silicon Valley market fate, alongside homes that sell for hundreds of thousands more than asking, foreclosures have continued unabated for the past year, according to Foreclosures.com.

Short-on-cash sellers are not making a killing.

"We see 20 new foreclosures a day (in Santa Clara and San Mateo counties combined). That's the same as it was a year ago," said McGee.

"That means with the inventory (in Santa Clara County) of about 750 homes for sale, you've got an inventory that's not quoted. That housing would sell over market. These people have 180 days to sell or list with a REALTOR and 99 percent of them do nothing. They hide under the rug and hope it goes away," said McGee.

Krueger says no one should be selling a home at a loss in Silicon Valley.

"I'm surprised there are any foreclosures. That is bizarre. I don't understand how you can have foreclosures sold at a loss in this market unless its due to irrational behavior," Krueger said.

Irrational behavior is not uncommon in Silicon Valley's housing market.

The area's last bust began early in 1989, but it wasn't until months later that the downturn could be accurately measured. By then, for many, it was too late. They'd already purchased at the market's peak.

"The market changed in March of 1989, but it wasn't until August that we were aware of a drop off in the number of sales. The story you are writing now? Agents have experienced it since the 12th of January," said Calhoun.

"Because of the lag time, how do you do the story ahead of time? The other hard part of it is, if the market turns, who will want to tell you? They won't want to get hung out there with a property they can't sell," said Calhoun.

In Silicon Valley, that old saying rings true: "A home is worth what a buyer is willing to pay."

Today.

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Published: February 17, 2000

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Broderick Perkins parlayed a career in old-school journalism into a contemporary digital news service that really hits home. The award-winning consumer journalist, originally from Wilmington, DE, is founder, publisher and executive editor of the bootstrap DeadlineNews Group, a Silicon Valley-based editorial content and consulting service specializing in residential real estate, consumer news and related editorial consulting services. The DeadlineNews Group includes the website, DeadlineNews.com, offering real estate editorial content and consulting services, and its back shop, the Deadline Newsroom, an open house on news that really hits home. Perkins obtained his formal journalism education from University of Delaware and a journalism boot camp, the Institute of Journalism Education at the University of California-Berkeley. He went on to 20 years of service as a daily newspaper journalist at the Wilmington, DE News Journal and San Jose, CA Mercury News. Perkins covered housing on the San Jose Mercury News reporting team which earned a General News Reporting Pulitzer Prize in 1989 for coverage of the Loma Prieta earthquake. He has also produced real estate, consumer and small business content for the Wall Street Journal, Los Angeles Times, RealtyTimes.com, Nolo.com, Better Homes and Gardens, the National Association of Realtors, Homestore/Move and Intuit/Quicken among more than three dozen publications. In addition to managing the DeadlineNews Group, Perkins most recently served as chief editorial consultant for Nolo's Essential Guide To Buying Your First Home, Nolo, and writes real estate television scripts for RealtyTimes.com.