Mostly people moving out. Silicon Valley has an unusually high number of transients in the U.S; when there's a downturn and people lose their job, domestic migrants tend to move back to their parents in other states, or at least go somewhere cheaper. A lot of people lost their job in 2009.

This is also why the rental market was more affected than the housing market: people who owned homes (particularly expensive single-family homes) had already put down roots in the area, and if they were foreclosed upon (and many were), they were replaced by other people who wanted to put down roots but had kept their jobs. The lower-end condo market softened significantly, though, because it draws from a similar demographic as the rental market.