It took five months, five Realtors working simultaneously and a flash of luck for Kerry Wills and his family to find their dream house or at least their dream lot.

Wills had already been outbid on two homes before he landed an unlisted home in the hills section of Manhattan Beach. Wills paid $1 million for the house, which he now intends to tear down and replace with a $1.85 million home.

“We felt really lucky,” said Wills, who works as a stockbroker at Smith Barney. “As soon as a home is listed, it’s gone.” He said several of his friends who also are shopping for homes have begun writing unsolicited bid letters to owners of homes that aren’t for sale.

Realtors and home buyers from Pacific Palisades to Encino have similar tales of a feeding frenzy for homes in local upscale neighborhoods. Spurred by growing confidence in California’s economy as well as stock market profits, many affluent Angelenos who had put off purchasing a larger home during the recent housing slump are now pounding the pavement before the housing market skyrockets.

In many communities, the rise in home prices already has been dramatic. The median home sale price in Malibu during the second quarter, for example, was $552,750, up 28.2 percent from just the first quarter, according to the California Association of Realtors.

Double-digit increases in median home prices for the second quarter also occurred in Hermosa Beach, La Canada Flintridge, Studio City and Venice.

The volume of home sales in those communities is also up markedly, with Beverly Hills, West Los Angeles, Marina del Rey, Pacific Palisades and Rancho Palos Verdes posting increases above 50 percent for the second quarter, compared with first-quarter volume.

As is evident from the communities in which the hottest action is taking place, it’s the prestige homes that are leading the county’s residential real estate recovery.

But that action is buoying the overall market.

The number of Los Angeles County homes sold in July rose 15.2 percent to 8,859 from the like month last year. The July median price was $172,000, up 4.2 percent from last July, according to Acxiom/DataQuick Informations Systems, a real estate research firm.

G.U. Krueger, deputy chief economist for the California Association of Realtors, said more people are jumping into the home buying market as prices keep appreciating.

“People can finally expect some return on their investment,” he said, adding that the activity in the upper-end market creates a ripple effect that lifts all the housing markets. “It’s like the art market: if you can’t get a Picasso, you go for a Matisse and bid up the price of a Matisse. So you end up with something from that (painter) in Carmel.”

Wills and his wife and two children had lived in Manhattan Beach for 10 years when they decided to move closer to downtown Manhattan Beach and better schools. Talk of DreamWorks SKG building a studio in nearby Playa Vista added urgency to their search, creating the anxiety among home buyers that “if you don’t move now, you’ll never get ahead of the market” once construction on the studio gets underway, he said.

Some of the San Fernando Valley markets, such as Encino, Sherman Oaks and sections of Tarzana, have been similarly hot.

Kathy King, manager of the Prudential Jon Douglas Co. Realty in Encino, said that 38 homes in the San Fernando Valley sold for more than $1 million during the first half of this year, compared to 20 in the first half of 1996.

“It’s not that there are more homes on the market, it’s that there are more people purchasing homes,” she said. “There’s a general confidence in the economy. A number of these people who are purchasing the $1 million-and-above homes either own their own businesses or have compensation packages tied to the performance of their company’s stock.”

Many Realtors nonetheless say that home buyers are still price conscious, and a house must be “priced right” to receive multiple offers. Silvia Mirzoian, a Realtor at Prudential Jon Douglas in Beverly Hills, said that homes worth around $1 million are “sold before the sign goes up,” as long as they’re priced reasonably. However, sellers of homes who put their list price beyond the current market price usually see their homes linger on the listings.

“When my clients receive 10 bids for their house within the first week, they wonder if they under-priced their home,” she said. “I tell them no, that just means they had the right price.”

Some seasoned home buyers, however, don’t agree.

“The prices have been crazy; they just go up and up and up,” said Hue, a president of a Los Angeles distribution company who declined to give his last name. The Westwood resident is looking to move into a Beverly Hills home in the $1.5 million range, and he’s been outbid twice in the five months he’s been looking.

“There’s low inventory and a lot of buyers out there. Even if a house starts out at a reasonable price, it’s too expensive by the time (the bidding) is over,” he said.

Linda Boss and her husband, Greg, are shopping for a home in La Canada, where the median home price rose to $462,000 during the second quarter, up 20.1 percent from the first quarter. Both grew up in La Canada, and they returned after Greg was transferred back from San Diego.

The Bosses have pounded the pavement for the past year and have seen sellers become more aggressive in their pricing.

“Sometimes it can be so frustrating,” Linda said. “You’ll look at a home and things will be just OK, then you see the price and it’s insane.”

Sally Underwood, manager of the RE/MAX Westside Properties in Santa Monica, said the $1.2 million-to-$1.4 million range is most competitive segment of the Westside.

“When people decide they want to step up (to a more expensive home), they don’t want to compromise what they want in a home,” she said.

The supply of well-priced, high-end homes, however, remains tight. Some Realtors predict that the recently passed federal budget agreement will encourage more people to sell their homes because sellers will no longer get hit with a capital gains tax if they sell their home for a profit of less than $500,000, for couples, and less than $250,000 for individuals.

“We’re very hopeful that will allow more empty-nesters to release their homes and help this market flatten out a bit,” said Mike Collins, manager of Shorewood Realtors Inc. in Manhattan Beach. “It’s a lot better for buyers to not have to make decisions with a stampede mentality.”