The housing crash is not going to bypass Los Altos Hills. The "high-end" areas are set to be the last to fall, but will fall the most for three reasons.
First, there are no more "upgrade buyers" as existing home equity is now almost non-existent--and it won't be back for a long, long time.
Second, non-conforming (i.e. non-government-sponsored) loans are almost impossible to come by and our banks here in the US are going into "Japan mode" where they quietly don't loan any money to anybody while they slowly recuperate.
Third, demographics are against you: Baby Boomers are moving from Big Houses next to work (viz. Los Altos, LAH, etc.) to small places in the middle of nowhere to retire without the kids. This bodes very badly for places like Los Altos Hills.
All this points to two things: 1) short term, expect 50% price drops from 2008 peak; 2) long term, expect that prices here will NOT keep up with inflation for a long, long time. Also, on an inflation-adjusted basis, prices will NEVER back back to peak in our lifetimes. This Bubble was funded by impossible financial structures which will be outlawed for a generation at least.
Check out: http://www.patrick.net/housing/crash.html
The analysis on there is very simple: a house's RENT is what determines it's "value" to people minus what you expect to make on appreciation. Nobody believes houses are going up in the next decade, so the rent-to-price ratio MUST therefore return to Earth. In Los Altos Hills today prices are at least DOUBLE the correct ratio and in many cased 3-4x the right ratio.