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Southern California home prices rise to new record

August 15, 2005

By Gina Keating

LOS ANGELES (Reuters) – Home prices in Southern California
rose to a record in July but the pace of gains slowed in San
Diego, considered a bellwether for the region’s superheated
housing market.

The median price of a home sold in Southern California, one
of the hottest U.S. housing markets, increased nearly 17
percent in July to $469,000 from $402,000 a year earlier, a
report issued on Monday by DataQuick Information Systems said.

But home prices in San Diego, which led the region’s run-up
in prices, rose just 5.1 percent, leading experts to warn that
housing prices could level off in coming months.

“I think it shows that the market here is softening a
little bit,” said Alan Gin, an economics professor at
University of San Diego. “San Diego was advancing more rapidly
than other places and we may be topping out first.”

Alan Nevin, chief economist for the California Building
Industry Association, said San Diego’s prices actually peaked
last summer and fall with frenzied buyers bidding well above
sale prices. Growth in housing prices has been declining across
California since then, he said.

“It means we are going back to normalcy — 6 to 8 percent
appreciation in a good economy,” Nevin said of the report. He
doubted, however, that the U.S. market as a whole would see as
dramatic a slowdown.

“The rest of the country never went through what we went
through to begin with,” he said.

The other five counties surveyed in the report posted
double-digit gains in housing prices, and all but Orange County
saw fewer homes sold in July than in the previous year.

Home prices in California have almost doubled since 2001,
creating jobs and income but also prompting concern of a
“bubble” among some analysts.

A median-priced house in California in June cost almost
$543,000, more than twice the median price of just under
$219,000 in the United States as a whole.

BURSTING BUBBLE?

“We’re watching the market carefully for any signs of a
turn, for any signs of the ‘bursting bubble’ that some analysts
have been predicting. So far we’re not seeing anything other
than the normal incremental changes you would expect in the ebb
and flow of a real estate cycle,” said Marshall Prentice,
DataQuick’s president.

Gin agreed that an imminent sharp drop in prices was
unlikely. “What I don’t see is a collapse in pricing. To get a
collapse … there would have to be a big job loss where people
are forced to put their houses on the market for distress
sales,” he said.

The rest of the U.S. housing market could begin to see a
slowing in growth in some markets. The cooling in San Diego
County was driven by rising interest rates, a lack of
affordable housing and a growth in lower-paying jobs, he said.




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