First-time home buyers out to beat the spring rush and profit-taking move-up buyers, boosted Silicon Valley home prices further into uncharted orbital territory in February.

Based on closed sales, the median price of single-family detached homes and condos in Santa Clara County (considered the heart of Silicon Valley) both rose $41,000 in February, according to the Bay Area Real Estate Market Newsletter compiled by Richard Calhoun, broker/owner of Creekside Realty in San Jose, CA.

The record median price of condos was $451,000 in February, $100,000 more than they were a year ago.

Single-family detached home prices breezed past the $700,000 mark with a $5,000 tail wind. The new record $705,000 median is almost $140,000 more than it was a year ago.

Generally low inventories, steady demand from buyers, and accommodating mortgage packages are largely responsible for prices that appear to know no bounds.

"Oh man. Oh my God," gasped mortgage broker Brandon Knapp when he first heard the new numbers.

But that wasn't because he was reeling with fears the market is about to go bust.

Knapp said lenders have so much confidence in the market, they continue to offer an ever-growing array of mortgage programs with what it takes, to keep home buyers buying.

"They are feeling so confident. They are allowing debt-to-income ratios of 55 percent. Lenders are accommodating the cost of housing because they feel it's a great investment" said Knapp with Lawson & Associates Mortgage Planners in Campbell, CA.

Calhoun said on March 8 in a region of 1.5 million people, there were only three single-family detached homes on the market priced under $400,000, approximately 66 percent of the homes are selling for more than asking and buyers on average, are paying 103.6 percent of the asking price.

The market is feeding on itself.

"When the consumer goes out and makes two or three offers and loses, they begin to realize they have to go way up over the asking price or they will lose out," Calhoun said.

Fifty-percent of the condos that sold in February were on the market for only seven days.

"That's where the market is really hot, because condos and townhomes are the only things that are affordable," he added.

Meanwhile, some real estate agents say profit-taking move-up buyers are having a liquid fuel affect on home prices too.

The Almaden Valley area in South San Jose saw a $55,000 increase in the median price -- from $855,000 in January to $910,000 February -- positioning the market as the region's next million-dollar home enclave.

Existing home owners are cashing in on large pools of equity to dive into a move-up home.

"We are getting a lot of move-up buyers with the schools as the driving force. We have a lot of blue ribbon schools down here. The older people are taking their profits and moving out to Sacramento, Las Vegas, Phoenix and young families are moving in," said Margaret Yost, a senior real estate agent at the Coldwell Banker office in Almaden.

Comprised largely of four-bedroom-two-bath homes, the sprawling suburb on March 8 had 37 homes for sale of which 18 were listed at more than $1 million. Only several homes were listed below $700,000, according to Yost.

"It may say it's listed for $800,000, but it may not sell for $800,000. You have to factor that in when you're looking," she said.

Knapp agrees and says many of his mortgage customers are move-up customers looking at the Almaden and nearer center city, the Cambrian area.

"They are taking their equity and rolling money into houses in Almaden, Cambrian. A lot of them bought a house two or three years ago and they are now going for the schools in Almaden," said Knapp.

Calhoun discounts the impact of the move-up market because the Almaden area is a small statistical sample representing only 54 of the 1865 single-family homes listed for sale in his analysis.

"What's driving the market is that there just aren't many homes out there," he said. "I'm writing offers way over the price," Calhoun said.

Mary Pope-Handy, a real estate agent with Intero Real Estate Services in Los Gatos, said multiple offer bidding wars are commonplace and the over-bidding rule-of-thumb is broken.

"There was a home the other day listed at $810,000. It ended up going for $900,000. The rule of thumb of $10,000 over asking or one percent of the list price over asking is not working. In Willow Glen, a $950,000 home got three offers and they all came in close to $1 million. We gave up in Sunnyvale, where homes are over bid by $150,000 to $200,000. I think that's Google (stock option) money coming to market," she said.

Can the market sustain itself?

Barring some unforeseen cataclysmic event -- including record increases in interest rates -- probably.

The current market is the second strongest ever in the price increase trend, Calhoun says.

During the hottest ever market, spurred by dot com money, home prices moved up by $200,000 from January 1999 to April 2000.

During the current trend, since January 2004, prices have moved up by $150,000. With two months remaining in the current period, home prices need jump only $25,000 during each of the next two months to match the $200,000 increase.

In two months that would leave the median single-family detached home price at $755,000.

"It's just brutal for buyers," says Pope-Handy, co-author of "Get The Best Deal When Selling Your Home In Silicon Valley," (Gabriel Publications, $18.95).

Published: March 9, 2005

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Broderick Perkins parlayed a career in old-school journalism into a contemporary digital news service that really hits home. The award-winning consumer journalist, originally from Wilmington, DE, is founder, publisher and executive editor of the bootstrap DeadlineNews Group, a Silicon Valley-based editorial content and consulting service specializing in residential real estate, consumer news and related editorial consulting services. The DeadlineNews Group includes the website, DeadlineNews.com, offering real estate editorial content and consulting services, and its back shop, the Deadline Newsroom, an open house on news that really hits home. Perkins obtained his formal journalism education from University of Delaware and a journalism boot camp, the Institute of Journalism Education at the University of California-Berkeley. He went on to 20 years of service as a daily newspaper journalist at the Wilmington, DE News Journal and San Jose, CA Mercury News. Perkins covered housing on the San Jose Mercury News reporting team which earned a General News Reporting Pulitzer Prize in 1989 for coverage of the Loma Prieta earthquake. He has also produced real estate, consumer and small business content for the Wall Street Journal, Los Angeles Times, RealtyTimes.com, Nolo.com, Better Homes and Gardens, the National Association of Realtors, Homestore/Move and Intuit/Quicken among more than three dozen publications. In addition to managing the DeadlineNews Group, Perkins most recently served as chief editorial consultant for Nolo's Essential Guide To Buying Your First Home, Nolo, and writes real estate television scripts for RealtyTimes.com.