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Economists had widely expected the Fed to keep interest rates unchanged at 1% but pundits had not anticipated a change in the policy statement. “We think this is simply a rewording, rather than a change in Fed’s accommodation policy as it conveyed that it ‘can be patient in removing its policy accommodation,’” said Ashraf Laidi, chief currency analyst at MG Financial Group.

The California Budget Project, a Sacramento-based public policy think tank, said in a report to be released today that an increasing number of moderate- and low-income Californians are “locked out” of the housing market.

“This is affecting so many middle class people now,” said report author Erin Riches. “It’s no longer just a low-income problem.”

The report also said that young people in California are finding it increasingly difficult to buy their own homes here. According to the California Association of Realtors, 19 percent of Bay Area households could afford to buy a median-priced home in November, down from 22 percent last year.

Among California’s low-income renters, inflation-adjusted household income fell more than 10 percent from 1989 to 2002, from $16,250 to $14,580, making it more difficult to afford housing, the report said. As a result, many people are living farther away from their jobs, resulting in long commute times.

Though average rents in the Bay Area have been declining since the first quarter of 2001, incomes have also been on a downward trend, said Matt Schwartz, executive director of California Housing Partnership, a San Francisco-based nonprofit.

In a paper to be published soon in the Brookings Papers on Economic Activity, house-price gurus Karl E. Case of Wellesley College and Robert J. Shiller of Yale University find that the national measures of market trends can be very misleading. In most of the country, house prices tend to rise gradually, in line with personal income, they find. But California, New Jersey, New York, New England and Hawaii — all of them short on land for building new homes — are prone to lurch from booms to busts or periods of stagnation.

The upshot: Buying a house in a popular, land-starved place doesn’t necessarily mean you will gain more in percentage terms over the long term. In the 21 years ended in the first quarter of last year, Messrs. Case and Shiller found, prices in Milwaukee more than tripled, about the same as in Los Angeles. The difference was that prices in Milwaukee rose steadily, while Los Angeles rode a roller coaster.

Messrs. Case and Shiller, however, see signs that a bubble mentality has developed in some of the hotter markets. Last year they surveyed 700 people who had recently bought homes. The survey found that many of these people had very high — and probably unrealistic — expectations of how much home prices would keep rising. On average, respondents in the San Francisco area thought prices would rise nearly 16% a year over the coming decade.

Another sign of self-delusion: Some people surveyed thought prices in places like San Francisco and Boston should continue to rise faster than those elsewhere because they are such attractive places to live and there is little space for new housing. Those factors do explain why home prices in those cities are relatively high, the authors note, but they don’t mean that prices should keep on rising at a faster rate.

Alas, write Messrs. Case and Shiller, “the single-family home market is a market of amateurs, generally with no economic training.”

Home sales in the Bay Area experienced their strongest December in more than 16 years as prices moved to new highs, says DataQuick Information Systems, a La jolla-based real estate information service. Santa Clara County led the sales pace among the nine counties included in the report.

The typical monthly mortgage payment that Bay Area buyers committed themselves to paying was $2,045 in December. A year ago it was $1,913. The peak was in May 2000 at $2,124.

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Other economists think the discrepancy between falling rents and rising house prices can be explained. Expensive house prices boosted demand for rentals among new arrivals during the Bay Area’s late-1990s economic boom, said Steve Cochrane, an analyst for Economy.com, a West Chester, Pa., firm. When the economy tanked, tenants moved out and homeowners hung on, so the rental market took the brunt of the slowdown, he said.

And cheap loans tilted the playing field further toward home purchases, said Christopher Cagan, an analyst for First American Real Estate, a title insurance firm: “Low interest rates have made a lot of renters into buyers.”

Michael Sklarz, an analyst for Fidelity National Information Systems, another title insurance firm, dismissed Baker’s bubble argument as “naive” and saw limited risks to homeowners. “You’d have to see substantially higher (mortgage interest) rates for the so-called bubble” to deflate, he said.

But Cagan saw another danger: home buyers relying on adjustable rate loans or introductory rates to leverage their buying power could be vulnerable to a downturn. A bubble, he said, is “a market driven by psychology” rather than economic fundamentals. Gimmicky lending has some worrisome similarities to a bubble psychology, he said.

“Only one in four California households make enough money to afford a median priced home in this state,” said Alexis McGee, president of Foreclosures.com. “In many California communities, the situation is worse.” Ms. McGee cited a January California Association of Realtors report that put affordability at 19% or less in several Bay area counties in the north and as low as 15% in Santa Barbara.

“California markets have stayed hot longer than anyone thought they would, partly because the state has gained more than 500,000 in population each year for the last four years,” said Ms. McGee, “but incomes are just not catching up.” She went on to say that the disparity between incomes and prices combined with rising interest rates would put downward pressure on home prices this year, and that, she said, would bring an increase in the number of foreclosures.

“We’re already seeing a rise in foreclosure activity,” said Ms. McGee. “Almost 16,000 California homes went into default in the third quarter of last year, a little over 3% more than in the second quarter.” She added that persistent and protracted unemployment was a contributing influence.

Bay Area tenants saw further rent decreases in the fourth quarter of 2003 despite earlier evidence that prices — which have tumbled dramatically during the last three years — were poised to rise.

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Those concessions seemed on the verge of subsiding in the second and third quarters of 2003, according to Latham. That’s when occupancy rates in some locales edged toward the 95 percent level — usually a turning point when landlords take the opportunity to boost prices.

Although occupancy rates in San Jose remain closer to 93 percent, in San Francisco and Oakland they hover near 95 percent. However, prices dropped further in the fourth quarter, due in part to anemic job and income growth.

“There’s a strong parallel between (rent) growth and apartment demand curve,” said Latham. “And when you realize that in October there weren’t any new jobs, and that we actually lost jobs in the Bay Area, that put a damper on the market.”

One landlord has an alternate theory: Low interest rates are enticing renters to buy homes.

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Simply put, many housing experts say rents and home prices should generally move in the same direction, in part because the same economic drivers — unemployment and shrinking income — affect both.

In addition, the price of any asset — whether it is a stock or a condo — should reflect its future income stream. As such, the price of a home should reflect the income if the property were rented.

Therefore, the divergence between rent and home prices doesn’t make any sense, the experts say, and could mean that home prices are too high and due for a correction.

“When you buy a house, you’re placing a bet on future economic growth,” said Ed Leamer, director of the UCLA Anderson forecast. “But when rents are declining, as they are in the Bay Area, then placing a bet on economic growth isn’t a good idea.”

The IPO puts the company in a fish bowl. All of the decisions that were made in private must now see the light of day. Unique companies become quite common as a result.

The lure of the big pay day? entices many to consider an IPO. For Google, it could mean billions of dollars in market capitalization. It may sound strange to ask such a question when billions of dollars are on the line, but here it goes: at what cost? The corporate culture of Google will change over time once they go public. It will have to. It is an inevitable outcome of an IPO.