The region of the $500,000 median-priced home just expanded in Northern California to encompass the entire San Francisco Bay Area.

Back in 2000, only a few counties in Northern California yielded a half-million dollar median and then only for existing single-family detached homes. A little more than four years later, the fear of rising interest rates and the region's continued desirability is sending price ripples throughout the greater nine-county San Francisco Bay Area housing market.

Now, for all homes in the region -- single-family detached and condos, both new and resale -- the median price peaked at a record $506,000 in May, according to La Jolla-based DataQuick Information Systems, which tracks prices and other statistics on closed transactions on all homes in California and elsewhere.

On the county level, four counties still have median prices below $500,000, but five counties have median prices higher than $500,000. In Marin, San Francisco and San Mateo counties, the median price of all homes is higher than $600,000.

There's little, if any, long-term relief in sight.

"I never bought into that bubble theory," said Richard Calhoun, broker/owner of Creekside Realty and publisher of the Bay Area Real Estate Market Newsletter, which tracks real estate statistics only on resale homes in a five-county area served by the regional multiple listing service, RE InfoLink.

"Prices will continue to go up in the long run, barring some unforeseen circumstance. I don't know why people think there has to be a limit. Look at the price of gasoline. It used to be 29.9 cents a gallon and milk, what was that, a buck a gallon?" he said.

Dataquick's median price reflects only a 2.8 percent increase from April, but a 18.5 percent jump from May last year -- the largest year-over-year increase since January 2001 when the nine-county $375,000 median was 20.2 percent higher than $312,000 a year before, according to DataQuick.

Prices in the region are being driven up by the growing number of sales.

For all homes, a total of 12,028 were sold in the region in May -- down 3.2 percent from 12,421 the month before, but what a difference a year makes. The May sales were up 13.4 percent from May last year, according to DataQuick.

Growing sales comes from both current market demand and traditional desirability to live in a region where the sun shines over diverse topography and just as diverse community most of the year.

More and more buyers are trying to stay one step ahead of rising interest rates, which have already risen a full percentage point this year in anticipation of federal benchmark interest rate hikes likely coming later this month.

However, because of low interest rates, buyers have been able to maintain a household budget with house payments not much more than they were many years ago.

"It's not the price, it's the affordability. The monthly cost is what a buyer looks at," said Calhoun.

The Bay Area's diverse topography ranges from mountains to valleys to beaches in a temperate climate that allows for lots of outdoor activities. The Bay Area is also an ethnically diverse region with Northern California's technology and cultural centers.

"We are surrounded by water and mountains and a limited supply of land, but it is a very nice place to live. It's the weather and the opportunity and just the lure of being in Silicon Valley," said Calhoun.

John Karevoll, spokesman for DataQuick, says the market is also driven by demand factors found in any market. "People get married, they have kids, they get new jobs, they get fired from old jobs. There is just an awful lot of demand. California is an attractive place to live," Karevoll said.

All the demand, in turn, feeds on itself as home buyers realize, in addition to shelter in a good location, they've also landed a solid investment.

"It's always a long-term investment. In 1981, my dad thought I was crazy buying a house in Campbell that was double the price of a house and in an inferior neighborhood. When people own real estate they drop anchor and keep doing it," said Calhoun.

Some short-term relief on price pressure may appear as more homes are listed for sale and the major buying seasons wanes.

"There are indications now that more homes are being put up for sale. That should take some of the upward pressure off prices. It also means that sales counts will stay strong throughout the summer," said Marshall Prentice, DataQuick president.

Published: June 22, 2004

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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.