Looking to the future of the Napa Valley real estate market, one issue to consider is what has happened to the influence of the dotcom buyers, and what part that could play in the year ahead.

In recent years the Napa Valley has become a second-home haven for the Bay Area wealthy. The rush to purchase property and the spiraling prices were driven up as buyer bid against buyer for the limited number of select properties that became available. As real estate generally follows the business cycle, our slower market did not arrive until the end of the first quarter 2001. We now see buyers taking advantage of the slight reductions and feeling empowered. Buyers are working the market and are buying property at a value based upon the value to them, not other buyers.

The dotcom buyers made a difference here as they did in San Francisco, leaving a legacy of high prices. To date I know of only one property that has sold at what would be a "fire sale" price, a loss in this case of about $500,000 from the original purchase price. Most of our dotcom buyers have been what I call first generation buyers. By that I refer to those who have gone through the cycle of developing a business with the help of venture capital, then taking the company public and selling out at or near the peak. They came to the Valley and bought the second home, paid handsomely, but are not in the same financial trouble as those who followed.

The subsequent generation of buyers are those who were the "high flyers," who made money quickly and may not have the staying power in a down or uncertain market. We have not seen that fall-out as yet, but it still may occur as this economy continues to flatten.

Overall the real estate market in Napa Valley continues to be reasonably active. The entry-level market of under $400,000 is still busy while the market in properties priced between $500,000 and $1,150,000 is spotty. In this latter segment, activity is focused on special properties that have the elements for a Napa Valley lifestyle or move-up property. The over-$1,500,000 segment is having limited activity, while the high end, five million dollars and up, still has some resilience since the economy does not impact that level of buyer. The second home sales around Silverado Country Club Resort market are very soft, with only occasional activity. Prices there are declining slightly, with the largest inventory in several years currently available. This may be one of the most impacted areas.

Vineyard land sales remain very strong, and vineyard prices have soared over the last few years. We have just about finished planting all of the available land in the valley that is suitable for vineyard, as governmental and environmental issues will prevent much more development. Values of good vineyard land in larger parcels start in the price range of $125,000 per acre and go to well over $200,000 per acre for that special property.

The Napa Valley is special. Many articles have been written comparing this valley to the Hamptons in New York, which the local residents don't like. We have some of the finest restaurants, art centers and culinary schools in the nation, with more being developed. For some it is "the" place to have a home or to visit. As the economy fluctuates the Valley seems to smooth out the peaks and valleys. We have seen a strong growth period end and we are now building a foundation for the next increase. When will that happen? Who knows? But it will come. In the Napa Valley we don't sell real estate as much as we sell a way of life. The best way of life, in our opinion.

Chuck Sawday is a real estate broker with over 30 years of experience. He is associated with Pacific Union Real Estate Group in the Napa Valley.