State home prices are forecast to rise 3.3% in 2010

Home prices in the Golden State will rise 3.3 percent in 2010, a mild increase but a major turnaround from the double-

digit annual drops witnessed for two consecutive years, according to a forecast released Wednesday.

The Los Angeles-based California Association of Realtors said it expects the median price of an existing single-family home in the state to rise to $280,000 next year.

The median price is the middle figure where half of homes sell for more and half for less.

Next year will "mark the beginning of the `new normal' for California's housing market," said James Liptak, the association's president, in a statement.

"This `new normal' likely will feature a steady stream of sales driven by distressed properties in the low-end of the market, coupled with moderate home-

price appreciation," the statement continued.

The forecast price reversal will be weaker than in previous rebounds, said Steve Goddard, a local Realtor who is the association's president-elect.

"Normally, the California real estate market just goes like gangbusters when it comes out of these recessions," said Goddard, a broker at Re/Max Marquee Partners in Manhattan Beach. "But this time, I think it's going to be slower."

However, that expected price increase is contingent upon various "wild cards" with highly uncertain directions, like foreclosures, loan resets, the labor market and the state's budget crisis.

For example, home prices could see "downward pressure should a heavier than expected wave of foreclosures come to market next year," said Leslie Appleton-Young, the association's chief economist, in a statement.

The South Bay's housing market will likely mirror the state as the whole, Goddard said.

But even a slight improvement in local home prices would come as a big relief for South Bay communities, which have seen dramatic annual price declines over the past two years, including in the high-

end beach cities and Palos Verdes Peninsula.

Statewide, the association forecasts a drop of 2.3 percent in resales for single-family homes to 527,500 units. Sales have generally been strong this year because of rising affordability and historically low interest rates.

Homes at the low end of the market - driven largely by distressed properties like foreclosures - will continue brisk selling. Sales of higher-end homes will remain relatively weak because of a tight credit market, where banks are requiring larger down payments and better credit scores before giving a mortgage.

As a result, the association expected distressed properties to account for nearly a third of sales in 2010.

"Housing in California has become a tale of two markets," Liptak said. "The low end continues to attract first-time buyers and investors, with a resulting shortage in the number of homes for sale. Sellers at the high end, however, continue to be challenged by the ability of home buyers to secure financing as well as their concerns about where prices are headed."

The association expected median prices to continue dropping "slightly" through 2009 and the first half of 2010 before leveling off in the summer.

Because of the forecast's predicted slow recovery in prices, people shopping for a home should not feel rushed about buying as soon as possible, Goddard said.

"This time it's going to be a little easier to take six months to a year to think about it and still get into the market and be OK," Goddard said.

He added: "Things are looking up. If you're looking for a house to buy and you find the right one, I'd be buying it now."

muhammed.el-hasan@dailybreeze.com