Four years ago Lisa Vaillancourt and her partner Whitney Miskell took a very deep breath and agreed to pay $285,000 for a three-bedroom house in Seattle's Queen Anne neighborhood.

Then came buyers' remorse. Even though they'd felt love at first sight for their charming, 1922 two-story Craftsman, "we thought we paid way too much," confides Vaillancourt. "We were freaking out about it. We couldn't believe we spent that much."

Fast forward to early in the new millennium. Having completed a significant restoration, the couple puts the house on the market hoping it will fetch $500,000.

It sells for more than $650,000.

Welcome to the North Seattle real-estate market - where prices that can't possibly get any higher do, where the competition to buy "good" houses can't get any tighter but does. Where Seattle's new-found technology money is rewriting the rules for who gets to live in the city and who doesn't. And where the farther north you go from the city center, the less true all of this may seem.

"There are so many different markets in this area," says Prudential Signature Properties owner Gary O'Leyar. "There are areas where your house can go on the market and get multiple offers and other areas where you go on the market and it takes a while to sell. That's the difficulty of painting this market with a broad brush."

Still, a Seattle Times computer analysis of single-family home-sales data from the King County Assessor's office shows that North Seattle, from the city center to the Snohomish County line, is the county's golden region. Here's why:

•Buyers pay more per square foot for homes in North Seattle than anywhere in the county.

Judged by median cost per square foot, eight of King County's 10 most expensive neighborhoods are in North Seattle: Madison Park, Capitol Hill, Queen Anne, Laurelhurst/Windermere, Magnolia, Green Lake, Wallingford, View Ridge/East Sand Point.

• None of the county's 20 least expensive neighborhoods is in North Seattle.

• Houses in the North End's most affordable neighborhood - Central Shoreline - are still more expensive on a square-foot basis than much of South Seattle and almost all of South King County.

Strike-it-rich tales abound

What Vaillancourt and Miskell didn't know when they bought their house on Queen Anne Hill is that the neighborhood is a microcosm of what's happening in choice North Seattle areas.

From 1997 through 1999 houses on Queen Anne Hill appreciated an astounding 60 percent.

"What's doing that is supply and demand," explains Windermere agent Jeff Valsik. "There's been absolutely no supply (of houses for sale) for the last 21Ú2 years and incredible demand."

With few homes on the market, no more land to build on and a county adding tens of thousands of new jobs, which draw thousands of newcomers to the work force, competition for housing can get cutthroat.

Strike-it-rich tales abound. Valsik tells of one house that sold for $359,000. Six months later the new owner sold it for $445,000. "That's only a 1,850 square-foot house with no view and four small bedrooms," Valsik recounts.

In the past 12 months he's had bidding wars on 18 properties, and seen "a huge demand for houses $600,000 on up. A house on Queen Anne in the $800,000 range, I guarantee there'd be a bidding war."

Who can possibly afford those prices?

"I'll bet 80 percent of the buyers are in the tech field," he said. "A lot have huge stock options and theoretically with that money there's no limit if they really love the house."

What's new here is the disconnect between earned income, which used to determine what buyers could afford, and stock options, which may well be the controlling factor in Seattle's upper-end market.

Doctors, lawyers priced out

Valsik says he's seeing doctors, lawyers and other non-technology professionals being priced out of Queen Anne. "They get washed out when they can't see themselves eating macaroni and cheese and drinking wine out of a box for the next two years."

But here's the paradox.

Although North Seattle's homes are pricey per square foot, as a group they're nowhere near as expensive as houses on the Eastside. This is because they're smaller.

Take the median-size house in Wallingford; it's 1,000 square feet smaller than a home in Issaquah. And because North End homes are smaller and cheaper, they're affordable to more buyers.

The Seattle Times computer analysis shows that last year numerous close-in neighborhoods offered median sales prices under $300,000: Green Lake, Wedgwood / Bryant, Phinney Ridge, Ravenna and the University District. (Median means half the houses sold for more, half for less.)

Ballard, the Central Area, Northgate and Maple Leaf all had median sales under $250,000.

"Ninety percent of people who want an in-city market want it because it is in-city," says appraiser Alan Pope, who says people buy homes that suit their image of themselves.

In other words, they simply can't see themselves in the suburbs, particularly if they don't have kids, and given the choice between paying $250,000 for either 1,200 square feet in Ballard or 2,200 square feet in Kent, they'll take Ballard, thank you.

"Young urban professionals have really changed those neighborhoods," observes local real-estate counselor Anthony Gibbons. He says they're often recent college grads, coming out of apartments, who buy well-worn homes and restore them.

"There have been renaissances in many different areas in North Seattle," says Prudential Properties' O'Leyar. Take Wallingford. Awash in rental houses, "it was a bedroom community for the University of Washington."

Ballard, likewise, was not particularly desirable 15 years ago, nor were Fremont or Maple Leaf.

With desirability has come significant appreciation in many of the North End's close-in enclaves. Last year Madison Park homes shot up 17 1/2 percent. Houses in West Ballard and Magnolia increased almost 15 percent. Those in the Wedgwood/Bryant areas experienced a 13 1/2 percent gain - all built on double-digit increases the previous year.

Prices dip farther north

Remember O'Leyar's caution about painting the North Seattle market with a broad brush? Here's what he means: If you go north of Seattle's old city boundary - 85th Street - the story begins to change.

Median sales prices are lower. Realtors report that in areas such as Northgate, North Greenwood, Lake City and much of Shoreline, properties can take longer to sell, and there are fewer multiple offers.

In addition, the neighborhoods from 85th Street north to the Snohomish County line have enjoyed significantly less appreciation over the last five years. This includes all of Shoreline, Lake Forest Park and West Kenmore - neighborhoods where ramblers and split levels, not the central city's sought-after Craftsmen and Tudors, form the bulk of the housing stock.

Appraiser Pope says the fact that they're less expensive doesn't technically make Shoreline homes bargains.

"The sellers there aren't selling them as bargains," Pope says. "Many Shoreline homes are the same quality as more expensive in-Seattle homes. You just get more for your money, and you get it because of traffic. As your commute time increases, your demand decreases."

Indeed, John L. Scott managing broker Linda Dorgan says homebuyers view Kenmore as "way far out."

"But from there it's easier to get downtown than from Ballard," she maintains.

She put this idea into practice two years ago when her daughter and son-in-law were house shopping. He was eager to buy in Ballard because he wanted a neighborhood feel and he wanted to be close to downtown. Dorgan convinced him he'd get more for his money by going North.

Over his initial protests, she sold the couple on a home that backs up to Lake Forest Park. "Now he loves it out there. It's quiet, and all the lots are a third of an acre." The shopping is fine, too, she says.

Elizabeth Rhodes can be reached at erhodes@seattletimes.com.