"Price appreciation in California continues to outpace that of the nation," said Leslie Appleton-Young, vice president and chief economist for the California Association of Realtors. "The median price of a home in California has increased by double digits for 23 consecutive months, a reflection of robust demand and a tight housing market. In addition, year-to-date sales are up 3.5 percent compared to the same period a year ago."

The median price of an existing home in California in October increased 17.4 percent, while sales increased 9.9 percent compared to the same period a year ago, according to the association.

"Despite the fact that mortgage interest rates have leveled off in recent weeks, consumers remain concerned about rates trending up in the coming months," said the association's president, Ann Pettijohn. "Those concerns continued to drive buyers into the housing market in October."

Closed escrow sales of existing, single-family detached homes in California totaled 636,690 in October at a seasonally adjusted annualized rate, according to information collected from more than 90 local Realtor associations statewide. Statewide home resale activity increased 9.9 percent from the 579,240 sales pace recorded in October 2002.

The statewide sales figure represents what the total number of homes sold during 2003 would be if sales maintained the October pace throughout the year. It is adjusted to account for seasonal factors that typically influence home sales.

The median price of an existing, single-family detached home in California during October 2003 was $381,200, a 17.4 percent increase over the revised $324,670 median for October 2002, the association reported.

Broker and attorney Jeff Stricker and residential Realtor Steve TenBroeck of Alain Pinel Realtors believe appreciation or depreciation of local home values over the next year is dependent primarily upon consumer confidence.

"The severe shortage of housing in the Bay Area creates a perpetual demand for housing. It's the price people are willing and able to pay for a home that fluctuates. We've observed that a buyer's willingness to spend rests primarily on their confidence in the future," Stricker and TenBroeck reported in a recent real estate update; they send the updates to clients on a monthly basis.

Stricker and TenBroeck said major factors affecting consumer confidence today are domestic security, employment outlook, movement in the Dow and NASDAQ indexes and interest rates. "These factors are not predictable and neither is consumer confidence. It fluctuates weekly," they reported.

Sales of existing single-family homes eased from an all-time high last month but remain at the third highest pace on record, according to the National Association of Realtors. At the national level, existing-home sales declined 4.9 percent in October.

David Lereah, National Association of Realtors chief economist, said the housing market is easing. "We think this marks the beginning of a soft landing for sky-high home sales," he said. "The last four months are the only months on record when the existing-home sales pace exceeded the 6.0-million mark—we expect the pace to ease gradually but to remain at historically high levels over the next year."

Housing inventory at the end of October improved slightly, rising 2.5 percent from September to a total of 2.46 million existing homes available for sale, which represents a 4.6-month supply at the current sales pace.

National Association of Realtors President Walt McDonald said housing demand is continuing to outstrip supply. "Although the supply of homes on the market saw some improvement at the end of October, inventories are still quite lean," he said. "With low interest rates continuing to fuel demand, the housing market generally favors sellers in most of the country, and home prices continue to rise faster than historic averages."

The national median existing-home price was $172,400 in October, up 8.2 percent from October 2002, when the median price was $159,300. The median is a typical market price with half of the homes selling for more and half selling for less. From 1982 to 2002, the average annual price increase was 4.4 percent.

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 5.95 percent in October, down from 6.15 percent in September; it was 6.11 percent in October 2002.

Of course, prices in Silicon Valley are much higher, and Stricker and TenBroeck believe the ideal Silicon Valley location contributes to home appreciation, making homes, on average, a much more predictable investment than stocks.

"From the mid-'60s to the early '80s, for instance, the Dow Jones average remained flat while local real estate values appreciated dramatically. Whenever we have a periodic employment downturn, people can't imagine appreciation returning. They forget that the No. 1 attraction in our area is the climate, one of the best climates in the world," Stricker and TenBroeck said.

"Smart, creative, moneyed people have repeatedly brought their ideas and energies and built incredible business here. That simple factor has caused home values in our popular neighborhoods to approximately double in each business cycle of seven to 10 years since World War II, and we expect this to continue," they said.

Their No. 1 tip for successful investing in real estate is to follow the money. "Typically, the higher the average neighborhood sales price, the greater the average percentage of appreciation of those homes, over time. Therefore, one can expect a better return on investment by buying a lesser house in a better neighborhood than by buying a better house in a lesser neighborhood of the same price."