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 Overall, Santa Clara County is doing well. Peripheral areas to the county are showing signs of the market turning (IE: average home prices dropping), but the count as a whole is doing amazingly well and continues to see double digit increases in the average price of homes.
However, we are still seeing increased inventory and stagnant sales. How long can those kinds of numbers allow home prices in the county in general to stay high and getting higher? Sooner or later, supply and demand will have to catch up with us.
Supply and Demand
 No real surprises in the supply and demand numbers. All the usual dynamics that we have been seeing are still in play.
When compared to April of last year, inventory is up and sales are down. New listings remain about the same. Inventory is up 20.7% from last year.
Sales are down 16.9% from last year.
With fewer buyers out there to get the inventory lowers, as we move further into the year (and the "selling" season of summer), buyers are going to have a hug selection of properties to choose from. 
When we look at the same numbers for just previous months, we can see the trend evolving over last year. Again we see that even in just the last month or two, sales have been relatively flat and inventory is showing dramatic increases from month to month.
As has been the case for a while now, Sellers and their agents need to be doing all they can to grab the attention of available buyers.
As the market stands in April, for every home that sells there are 4.4 homes on the market.
Home Prices
 Home prices again showed in increase when compared to the year before. The increase in average home prices was 15.6%.
What will stop this market? Frankly, I am surprised that we have not seen the average price come down. It is amazing that in the face of huge inventories, dwindling sales and generally lackluster performance in every other area, that we can still manage to see year to year increases in the average price of a home in Santa Clara County. 
Yet again, we see a general increase with minor fluctuations that go along with the seasons. Of course, remember that these are for the county as a whole. There are areas of Santa Clara County that are performing better and worse than these average numbers. In fact, depending on where a home is can determine if things are better for the buyer or seller - and all within a 20 minute drive.
In general, the further south in the county you go, the more it is a buyers market. However, many of these communities can be seen as indicator communities that give us a clue as to what direction the market may head in the very near future.
The bottom line for me is that we cannot sustain this kind of average price increase given the supply and demand numbers we have already looked at. As I keep saying, something has gotta give.
Days On Market
 Yet another indication that the market is turning more toward buyers is the increasing amount of time it takes for sellers to get their home sold.
In April, it took the average home 46 days to sell. While this is still a relatively low amount of time, it is still 27.8% higher than this time last year. The days to sell has increased for the month of April in every year since 2005.
The highest number of days we have seen since 1998 was in 2003 when it was taking 59 days to get a home sold.
I mention this to draw your attention to the type of market we saw back in 2002 and 2003. In many ways it was very similar to what we are seeing now. Even then, we only saw an extended period of flat prices instead of an increase or a decrease. So we have some history to fall back on when some assert that despite these market influences, Santa Clara Count can come out of this period without seeing a drop in the average price of a home.
However, when we look at the 200-2001 season we can see that all these market influences did result in a price drop. However, the changes in the market came on much more suddenly while in this case, we are seeing these trends evolving over much longer periods of time.
How Close To Asking Price?
It's amazing but the average home in Santa Clara County got 100.4% of its asking price in April! That means that the average home got more than what the seller was asking.
With all these other factors in play, it is really amazing.
Final Thoughts
Given what we have seen and the history of Santa Clara County, I think it is still a toss-up as to which way this market will go. The two choices are really flattening prices for a while to allow inventory and sales numbers to catch up, or a drop in average home price.
If we see inventory continue its rise to 2000-2001 levels, we very well could see a drop. But even then, I don't think it is going to be a huge drop.
Even if the prices do drop, because of the slow, evolving nature of the market, I don't think any drop will be particularly long lived. The sign posts from past years are all there to give us some clues, what we need now is just a little more data for this year.
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