Tech rebound drives housing frenzy in Silicon Valley

Home prices in Silicon Valley continue to skyrocket, with little sign of returning to earth anytime soon, according to real estate experts.

For the last four months, the average price of a single-family home in Santa Clara County—the heart of Silicon Valley—has been more than $1 million, according to recent data from MLS Listings, a service for real estate agents.

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"In 2000 it was a bit like this, during the dot-com bubble," said Mary Pope-Handy, an agent with Sereno Group Real Estate in Los Gatos. "It's not necessarily a bubble, but there are those hot-bed areas—Menlo Park, Cupertino, Mountain View—where I'm concerned about what could become a bubble."

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These micro-markets will remain abnormally high because inventory is low and demand is intense, thanks largely to the tech rebound.

In July, the average price of a single-family home in Santa Clara County was $1.05 million, up 16 percent from $914,047 a year earlier, according to MSL Listings.

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The median house price in Santa Clara was $841,000, just $24,000 shy of the 10-year peak of $865,000 set before the housing crash.

"The opportunity is incredible for sellers who are sitting on a lot of equity," said Quincy Virgilio, vice chairman of MSL Listing and a Keller Williams agent. "Home prices in most of Santa Clara are back to where they were pre-bubble."

The voracious demand makes Virgilio believe the market isn't headed for a bubble. He predicted that prices will level out when properties have appreciated four to eight percent.

Of course, that makes it difficult for buyers. With demand pushing prices up and keeping supplies lean, even finding a house—let alone buying one—is almost impossible.

"This market, as a seller, is the best market we've ever seen. But for a buyer, the opposite is true," said Virgilio, who has been a real estate agent in the valley for 20 years. "It's insane. We haven't seen inventories this low since I can remember. ... It's unprecedented."

Housing inventory in Santa Clara County were down 14 percent in July from a year earlier. As of Friday, a total of 2,020 properties (single-family homes, condos and townhouses) were available—an exceptionally low number, according to Carolyn Miller, president of the Silicon Valley Association of Realtors.

"In a normal market—when there use to be normal markets—there would be 6,000 properties around the county," she said.

In Cupertino, where Apple is headquartered, only 58 properties were for sale as of Friday—about half of the number available at the same time last year, according to data provided by MLS Listing.

And the properties that are available have a brief shelf life.

Miller said that from May through July, a property in Santa Clara County was on the market for an average of just 25 days, compared with an average 40 days in the year-earlier period. Properties in all of Silicon Valley lasted about 19 to 21 days, she said.

Offers start coming in much earlier, as well. Miller said she already has five offers on a $1.38 million house listed a little over a week ago.

Though buyers had the advantage in 2008 and 2009, fear rooted in the bust kept them away, said Pope-Handy. Now, fear of ever-rising prices has them clamoring to make offers far above the appraisal or asking price.

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"People are more motivated by fear more than hope," Pope-Handy said. "When you are buying in a buyers' market there is a hope that it's going to get better. But when prices are going up like this, that's when people are jumping off the cliff to do it."

Miller said that most clients in Silicon Valley are engineers for one of the major tech firms, including Apple, Google and Yahoo. But other highly paid professionals are drawn to the area because of the good schools, she added.

Pope-Handy said she was surprised by the growing number of first-time buyers of $1 million-plus properties—often people in their late 20s and 30s working at a tech firm. She said the tech industry is driving the housing rebound as well as the area's economic growth.

"The tech rebound is ... absolutely huge because it's fueling all other kinds of industries," Pope-Handy said. "The normal businesses are fueled by an increase in population. It goes down to the micro level and just helps have more people employed everywhere."

—By CNBC's Cadie Thompson. Follow her on Twitter @CadieThompson.