In Silicon Valley, you can be priced out of the housing market while you sleep.

Home prices recently jumped 10 percent -- $58,800 -- in a single month, $22,000 more than initially projected.

For potential home buyers, that's got to hurt.

But real estate agents say now is not the time to throw in the towel.

Prices may have just begun to take off.

"With some 50 million people expected in California in the next 10 to 15 years, housing is under tremendous pressure," said Mark Elices, a real estate agent with Coldwell Banker in San Jose.

Preliminary projections earlier this month proved to be conservative and put the median price of single-family detached homes at $603,000 for March, based on closed sales, but when the dust cleared, the market yielded a record $625,000 median, up from $566,200 in February.

"That's typical when the market is crazy like this. You can't anticipate something like this and don't anticipate appreciation like this forever" Elices cautioned.

The "crazy" market is being fueled by low interest rates, move-up buyers tapped out on capital gains tax exclusions and pent-up seasonal buyers generating so much demand that the sales price-to-list price ratio also moved up beyond projections to 100.8 percent, which means the average sales price is 0.8 percent more than the asking price.

Sales also threatened to topple records.

The number of homes sold in March stood at 1,440, just shy of the two-year old record of 1,470 homes sold in May of 2002, says Richard Calhoun, who publishes the Bay Area Real Estate Market Newsletter with statistics from the area multiple listing service RE InfoLink.

Limited inventories are also sweeping homes off the market and into escrow in a median 11 days after they are listed.

The market heat comes unexpectedly after years of cool, single-digit home price appreciation as Silicon Valley grappled with the dot com bust, high unemployment and job outsourcing from it's large, but weakened technology sector.

The median moved only about 1 percent from $560,000 in April 2000 to $566,200 in February 2004, according to Calhoun.

The Federal Reserve Bank of San Francisco's quarterly "Western Economic Developments" reported, in terms of home price appreciation last year, the San Jose metropolitan area ranked two spots from dead last -- 218th in 220 metropolitan areas.

The slow rate of appreciation and continued economic doldrums in the region, unfortunately, may have lulled many buyers into a false sense of security that home prices would remain flat or continue the slow rate of appreciation.

The economy is still soft, but the housing market just got a lot harder. "There is no way to predict the future. Real estate markets are like mutual funds. You can't base it on past performance," said Elices.

Published: April 9, 2004

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A journalist for 35-years, Broderick Perkins parlayed an old-school daily newspaper career into a digital news service offering editorial content and consulting services. Perkins' San Jose, CA-based DeadlineNews Group includes the flagship news site, DeadlineNews.Com, offering real estate, personal finance and consumer journalism, and a backshop, the Deadline Newsroom.