Los Gatos should be evaluated together with the region as a whole. If you are ready to buy, and plan to stay a long time (5 years minimum), home buying in Silicon Valley generally is a good idea. There are more people needing homes than there are homes for them to buy due to strong jobs here.
Is Los Gatos overpriced for the area? Actually I think it is undervalued compared to Almaden Valley, Saratoga, Cupertino and other nearby areas in the greater San Jose and Santa Clara County area. One indicator that the market here is slightly softer than other areas is the sale price to list price ratio. Each month I put out a real estate report for the county, and consistently, Los Gatos has had one of the lowest ratios - the other lower areas are usually Morgan Hill and Gilroy. With great public schools, a wonderful downtown and sense of community, the town of Los Gatos has tons to offer. So why is it slightly less in demand?
One reason might be that it's just a little further away from high tech hubs in Mountain View, Sunnyvale, Palo Alto and so on. But the same could be said of the more remote, and less expensive, southern area of Almaden Valley in San Jose. Almaden does not have a quaint downtown area per se. It does have schools that are just as good. Many buyers feel that the further drive is an OK tradoff for the school scores in Almaden.
And if you look at pricing and schools, in general it gets less expensive from Saratoga to Monte Sereno to Los Gatos to Almaden - that part seems appropriate. Of those areas, though, Los Gatos has the most to offer - which would seem to increase its value considerably. At least I believe it should.
If you enjoy Los Gatos, now is a great time to buy. The first half of the year was a bit of a wild ride in LG and throughout the Bay Area, but now it's calmer and much easier to buy a home. Real estate economists are predicting that in the new year it will get crazy again due to the prolonged inventory shortage. The autumn is often an easier time to purchase a home, and this year seems to be no exception.
If you'd like to learn more about Los Gatos neighborhoods, here are a couple of links on my Live in Los Gatos blog (with videos):
Or just navigate around the blog for market stats and more info. I think you will find that Los Gatos is a great place to call home!
Realtor, CRS, CIPS, ABR, SRES
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Sereno Group, Los Gatos