"I think we are experiencing an unusually busy summer mainly because we have seen a slight increase in interest rates. For those people who have been on the fence trying to decide if they want to buy a home, this is real motivation and incentive to take action," said Manlynh Rummler of Alain Pinel Realtors.

Rummler works with many first-time homebuyers in the $700,000 to $900,000 range. "All the properties in Palo Alto that I have been involved with in the last month have seen multiple offers," Rummler said.

DataQuick, a real estate information service, reported that home sales in the Bay Area remained brisk last month as prices crept up to a new peak, the result of continued low mortgages interest rates and steady demand.

A total of 10,492 new and resale houses and condos were sold in the nine-county region last month. That was down 1.0 percent from 10,603 in May and up 4.3 percent from 10,056 for June a year ago. Last month was the first time this year that year-over-year sales in the Bay Area showed an increase, according to DataQuick Information Systems.

So far this year 53,565 homes have been sold in the region, down 5.6 percent from 56,766 for the first half of last year.

"There's nothing in our statistics that would indicate any change in Bay Area trends in the next few months. Buyers are being prudent, and modest price increases have been offset by low mortgage interest rates. If anything, there may be an up tick in sales between now and fall," said Marshall Prentice, DataQuick president.

DataQuick reported that indicators of market distress are still absent. Foreclosure rates are low, flipping rates are low, adjustable-rate mortgage usage is low, down-payment sizes are stable and there have been no significant shifts in market mix.

The typical monthly mortgage payment that Bay Area buyers committed themselves to paying was $1,860 in June. A year ago it was $2,052. The peak was in May 2000 at $2,124.

The median price paid for a Bay Area home was $443,000 last month, a new high. That was up 3.7 percent from $427,000 in May, and was up 6.5 percent from $416,000 for June last year, according to DataQuick Information Systems.

DataQuick monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts.

David Lereah, chief economist for the National Association of Realtors, said low interest rates continue to fuel the market.

"The slight easing of sales in June may reflect some weakness in the labor markets, but historically low mortgage interest rates are helping new households to afford homes and allow existing owners to sell their homes and purchase another—this is the primary reason we expect a new sale record this year," Lereah said.

The timing of low interest rates coincides with strong housing demand by young households as well as by immigrants and minorities, explained National Association of Realtors President Cathy Whatley.

"Echo boomers—the children of the baby-boom generation—are entering the age for buying a first home. In fact, four out of 10 buyers are purchasing their first home, which is providing liquidity to sellers that in turn boosts other sectors of the market," Whatley said.

On the property management side, Willi Krauss, of W.A. Krauss & Co. Property Management, is still getting a lot of 30-day notices from tenants.

"It seems that about half of them are buying first-time homes because of the low interest rates. The others are moving to less expensive units because they have lost their jobs or are leaving the area altogether because it is too expensive here," Krause said.

Realtor Dulcy Freeman of Coldwell Banker said July was a busy month for real estate, thanks to interest rates.

"As mortgage interest rates have spiked consecutively for the last few days, buyers who have been circling and taking their time have felt the urgency to lock in and buy before rates climb any higher," Freeman said.

Contrary to recent reports that people are exiting California in droves, Realtor Linda Hollister said she is getting a lot of buyers from the United Airlines plant that recently closed down in Indiana. "I experienced a lot of new people to the area and middle-aged folks in my open house on the market for $1,799,000 in Palo Alto last Sunday," she said.

Steven Hyman, a broker and owner of Century 21 Sunset in Half Moon Bay, said when the Federal Reserve cut the discount rates, mortgagee rates went up a bit and created some movement in the market.

"I think that got buyers off the fence because they saw the bottom for rates. As a result, over the past six weeks we've seen an increase in the number of homes going sale pending and a reduction in inventory," Hyman said. "The good news for buyers now is that there are still a lot of good deals but that is starting to change as the inventory decreases."

Coldwell Banker Realtor Leannah Hunt believes this is a strong market, though it may have slowed a bit due to the cyclical slowdown of mid-summer.

"I was just involved in a multiple offer this morning on a one-bedroom condo in Mountain View, and it hasn't even been on tour yet," Hunt said. "There are lots of buyers in all categories, and with good interest rates and a stronger economy, the real estate market is very healthy."