Optimizedprime has pointed out several key points for Los Altos that so far don't make much logical sense according to the current real estate market.
P/R (price-to-rent) ratio is completely ridiculous at Los Altos. For the current high price to buy a home or condo, it would definitely much cheaper to rent right now in Los Altos. For example, a 1-million dollars home here will rent out for at most $3500-$4000/month, which couldn't even cover the 1-mil dollars mortgage monthly.
During the real estate boom, home prices in Los Altos has significantly increased just like other places during that time in CA. However, during the burst, other places dropped by 40%-50%, yet Los Altos has not dropped at comparable percentage. Will it drop down to 40%-50% and when? Impossible to know.
The average income of the people in this town doesn't support the high home prices. I came to a conclusion that homes in Los Altos majority owned by people who have been living here for a long long time (pre-Silicon Valley time) when prices were still cheap, and those who gained a lot of money from stock options and cash it out before the Tech era burst. And because it is a small town, there are not a lot of homes for sales, the down trend of prices will no doubt occur, but at much slower pace and for a long time. This factor depends on the number of home for sales in Los Altos in the future.
I myself will refuse to pay at such a high price for Los Altos. I continue to rent here, while maybe looking else where to buy if opportunity arises.