The SJ Mercury News reported today that the median sales price rose 15% in December vs. the same period a year ago. Strength was primarily at the low-end of the market. The article is here:
What this means for Los Altos, Los Altos Hills, and other high-end markets is that increasing demand will support "move up" buyers coming from moderately priced markets.
As that starts to turn around this year, we'll see the average "days on market" drop and more multiple offer situations. While both of those would normally give rise to a big bump in prices (often 10% or more in Spring alone), I don't think we'll see the same situation this year.
The market in Los Altos and the Hills will certainly stay strong this year. However, even with strong demand I don't see huge gains in median and average selling prices. My reason is that the more prices go up, the few buyers available to buy. If we price too many buyers out of the market inventory will stagnate again. So, we need a balance between price increases and buyer demand.