"It has slowed down a bit, but this is the norm in July and August. Most people are into enjoying the summer months and are not looking forward to going through the selling and buying process," said Judy Hamilton, a mortgage planner with Bankers Network.

Hamilton says the market usually picks up again after Labor Day. She has also seen an increase of first-time homebuyers coming back into the market, which she believes is a healthy sign.

"I have not seen too many multiple offers and some properties even go for slightly less than asking price. Sellers still think it's a total sellers' market and it has changed with the increase of inventory," Hamilton said.

She advises sellers to listen to their trained real estate agents and price their homes to sell instead of setting a price with the hope of getting a lot of offers. "Having a home sit on the market can cost the seller monthly expenses, which cuts into their overall profit," Hamilton said.

Realtor Lovinda Beal of Coldwell Banker in Portola Valley says the value of real estate is one component, while the value of winning in a multiple-offer situation is another.

"Properties that are listed at expected market value tend to sit. Listing for significantly less tends to draw multiple offers. For instance, a house listed for $899,000 had eight offers and sold for over a million. If they'd priced it at $1,050,000 it would still be sitting there," Beal said.

Realtor John King of Alhouse King Realty in Palo Alto believes the key to a successful sale is to list a home at a reasonable price and let the market determine the value.

"We just received 24 offers on a home priced at $700,000 in Sunnyvale. It was a decent home, which looked good cosmetically but needed to have the kitchen and baths remodeled. It sold for five percent over asking. Buyers are still in the market looking for value. Even though prices have gone up 20 percent in the past year, there is definitely support being shown for the new prices that have been established," King said.

While the real estate market continues to be a delicate balance between inventory, interest rates and consumer confidence, it also is price-sensitive as many Realtors see multiple offer situations occurring in the under $1 million price range.

According to a forecast from the National Association of Realtors, home sales are expected to come down from record levels during the second half of this year, but will easily set annual records for both new- and existing-home sales.

Existing-home sales are forecast to increase 2.9 percent to 6.98 million for 2005, while new-home sales are seen to rise 4.8 percent to 1.26 million this year. Total housing starts--single-family and multifamily--should grow by 3.2 percent to 2.02 million units in 2005, the highest since 1978; single-family starts are projected to set a record of 1.67 million.

David Lereah, the association's chief economist, said home sales should be fairly stable in the near term. "The housing market is probably close to a peak right now in terms of sales activity, but there is tremendous momentum," he said. "Sales are expected to coast at historically high levels into next year, but they will trend slightly downward."

National Association of Realtors President Al Mansell said housing shortages persist. "Because there is such a tight supply of homes available for sale, we're now projecting the national median existing-home price this year to rise at a double-digit rate, which will be the strongest rate of price growth in 25 years," he said.

Of course, Silicon Valley prices are off the charts compared to national home prices, but the overall economy seems to be improving slightly both in the Bay Area and nationally.

The 30-year fixed-rate mortgage is projected to rise slowly to 6.2 percent in the fourth quarter, and reach 6.6 percent by the end of 2006.

The U.S. gross domestic product is forecast to grow 3.6 percent this year, with the unemployment rate averaging 5.0 percent during the second half of 2005. The Consumer Price Index is expected to increase 3.0 percent this year, while inflation-adjusted disposable personal income is likely to rise 2.1 percent. The consumer confidence index should rise to 107 early next year.

Lower-than-expected mortgage interest rates will push home sales to a fifth consecutive record in 2005, according to Lereah. In fact, long-term interest rates look very favorable. Lereah anticipates both existing-home sales and new-home sales to hit new highs this year, and he says home prices will continue to rise overall.

Although the real estate bubble continues to generate debate, most Realtors think there will be no loud popping sound in the near future.

"Obviously, there are some local bubbles," Lereah says. "But I tend to think that with most of the bubbles, the air will come out slowly, rather than popping."