The inventory of available homes in the area is a sure sign of where prices are going. Lack of inventory = trends up in prices for the most part.
For the County of Santa Clara, available homes and condominiums combined are as follows, as of March 21, 2011:
2008 = 6899 homes. 2009 = 5979. 2010 = 3467. 2011= 3501.
For the area comprised of Menlo Park, Palo Alto, Mountain View, Los Altos and Los Altos Hills, the figures are as follow:
2008 = 392 homes. 2009 = 685. 2010 = 483. 2011 = 369
This latter figure explains why, currently, about half of the homes offered in Palo Alto receive multiple offers and prices are going up as a consequence.
What I experience is that the best products for sale right now are very much in demand, and based on the number of offers on some of these properties for sale, there are a lot of people in a position to buy "right now". A lot of pent-up demand... On the other hand, those properties that are not particularly attractive for some reason or another can linger a long time on the market. Now more than ever quality & desirability rule.
Meanwhile, according to C.A.R.'s February sales and price report, the median price of an existing single family residence declined about 2.5 percent year over year (California Association of Realtors). Go figure...
Any other area out there where prices are going up? I am curious to know.