Today I’d like to share Intero President & CEO Gino Blefari’s account of a conversation at a recent dinner party that emphasizes a point I often make: All real estate is local. The hot, competitive market in Piedmont that Gino describes in his story is certainly something we are seeing in many of the neighborhoods I serve in the Peninsula and South Bay–including Los Altos. Now, read on for this tale of two cities (or as Gino describes it: “two real estate worlds”):

At a recent dinner party, I was listening to one of the other guests talk about how he and his wife have been trying to buy a house in Piedmont, Calif. He went on in detail about how each offer they’d made was competing against a dozen other offers on average. These houses were going for well above asking price.

Yes, in many markets around the Bay Area such as Piedmont, Palo Alto, or parts of San Francisco it’s as if we’ve time traveled back to 2004, when multiple offers were to be expected and any offer close to asking price was merely the butt of a joke.

Now let’s first be clear: If you’re unfamiliar, Piedmont is a community about the size of a small pea surrounded on all sides by Oakland in Northern California’s Bay Area. It’s exclusive, highly desirable, and the houses are quite stunning.

Dinner party guest #2 who owns a house close by Piedmont in Oakland then starts reeling about how weird this situation sounded because he’s been talking to agents about selling his house and he’s looking at pages and pages of competition, which just keeps dinging down his hopes for the price he wants to fetch.

A tale of two real estate worlds? Indeed. The first rule of real estate holds interesting insight – two locations mere blocks apart that see diverging price trends.

I thought of this dinner party chit chat as I read the reports of declining home prices this week. Zillow’s most recent data shows home prices fell 3% in the first quarter – the steepest decline since 2008. And Fiserv Inc. is predicting home values will stabilize somewhat in the third quarter after dropping 3% in the first half of this year.

Four years into this housing recession and prices are still falling at the national level? Some commentators predicted this would happen while the nation was enjoying the home buyer tax credit last year. They said that incentive would only serve to prolong the inevitable and that prices would need to eventually come back down to what the market could bear.

That’s a wise man talking right there.

Prices have come down, but millions of people are still unemployed. Millions of foreclosures have gone through, adding millions more homes to the market. It doesn’t make sense for prices to go up right now while all the other factors are lagging far, far behind. What this all points to is more price declines for many markets (not all).

While a market like Piedmont can bear price increases, multiple offers and a healthy pace of sales, there are several others for each Piedmont that simply can’t.

In real estate, it’s all relative. Each sale needs just one buyer and one seller. The value is determined by how much that buyer thinks the house is worth compared to the rest of the current market’s supply and demand. One location is as unique as the next.

It’s been a long strange trip, and we haven’t arrived yet.

What are you seeing with prices in your market? Still declining? Stable? Or on the rise once again?