After listening to the myriad buyers who have come through recent open houses looking for "bargains", I think it's time to clarify the Los Altos (and Los Altos Hills) markets. There are NO bargains in this area! I say that firmly so that those who will actually listen understand that this area is NOT SAN JOSE! The average selling price in Los Altos went up 9% last year and over 4% so far this year.
Now, I will tell you that there are some GOOD VALUES in the Los Altos market but there's a difference between value and bargain. The key is understanding that the "market value" of a home is what someone will pay for it, not what a seller wants to sell it for. When you see a home that starts at $3.5M and then ultimately sells for $3M it's primarily because the seller had high expectations and overpriced the home. A well priced home typically sells quickly. A high priced home will sit on the market for weeks or months and finally sell and the "market value". Most homes in Los Altos are priced well and sell quickly. The exceptions are homes are the very high end (over $4M) which typically take longer to sell.
So, if you're out looking for a home and frustrated by being outbid (multiple offers are still common) and an unwillingness of sellers to reduce their price, then bear in mind that inventory is very low in Los Altos, demand is high, and prices continue to rise. Find the best home you can afford and get in as soon as possible.