I lived in Sillicon Valley (SV) from 1999 – 2005. So, I can give you some insights.
The peak of the market in SV was in May/June 2005. I know this because:
1. In May/June 2005, there were bidding wars for almost every house for sale.
2. When I got a job offer, with a relocation package, to move to San Diego in August 2005, I put my house on the market. By August, the bidding frenzy has subsided (my broker is a close friend from high school, so we talked a lot about the market).
Since then, the real estate correction has encroached SV from the surrounding regions. First, it was Sacramento/Fresno (believe it or not, many folks commute from Fresno to SV everyday). Then, it was Gilroy/Vallejo/East Bay.
Currently, it’s Evergreen/Santa Teresa (according to my relatives who still live in SV). Basically, the correction starts from the least desirable areas to the most desirable areas.
The areas that you mentioned (Los Gatos, Palo Alto …) are the most desirable. This is why prices haven’t gone down there.
One thing that you’ll hear folks in SV say: “Home prices will never go down in SV because SV is the technological cradle of the world, everyone want to live here”.
The problem with SV (same as southern CA) is that home prices are out-of-line with incomes by 50%. So, unless, the job market is so hot that incomes go up dramatically, prices will go down dramatically.
I lived in both SV & southern CA. So, I can say the following with confidence:
One of the reasons that home prices went up so much is because of the belief in continuous appreciation, an illusion. This illusion is stronger in SV than in southern CA. This is why the correction in SV lags the correction in southern CA.
