I lived in downtown Sacramento for a few years. I moved into new high(er) density apartments [0] the first year they were built. I paid $1000/month for a 400 sq ft studio with parking. For price reference, later I rented a more traditional apartment that was twice as big, several blocks away for only $650.
The takeaway is that until everyone who can pay ridiculous prices has housing, prices are going nowhere but up in SF. Decent middle-class apartments with a couple bedrooms in Mountain View are $3k+.
Prices are expensive because the SF bay area is awesome. It has a massive number of high paying jobs, ridiculous natural beauty, a gorgeous climate, tons of culture, diversity, and history.
Contrast to Stockton, a mere 90 miles away, where you can buy a 2,000 sq ft 4bd house for $276k [1]. But Stockton's got none of the appeal of the SF bay, and it certainly doesn't have the jobs that SV does.
People will fight hand over fist to get into SF, nobody's sprinting to live in Stockton.
(nothing personal against Stockton).
[1] http://www.redfin.com/CA/Stockton/9467-Ravenna-Ln-95212/home...
