RealEstateEconomyWatch.com

California’s real-estate market will rebound in 2010, with modest price increases and steady sales activity, according to a forecast by the California Association of Realtors released yesterday.

The report forecasts that the median price of an existing home in the nation’s largest real estate market should increase 3.3 percent, from $271,000 this year to $280,000 in 2010.  Existing home prices have not risen since 2007.

However, sales next year in California would drop 2.3 percent to 527,500 homes, compared with 540,000 transactions this year, the forecast said.  Though sales will decline, the number of transactions will still be strong enough to support prices, CAR said. Sales of houses and condominiums would decrease 2.3% to about 527,500.

CAR President James Liptak said the trends in 2010 will mark the beginning of a ‘new normal’ for California’s housing market.

“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,” he said.

The market this year has been characterized by stabilizing prices and a surge in sales after two years of double-digit percentage, a trend that will continue into 2010, the Realtor group said.

“We forecast that sales would be off a little bit next year because we’re scheduled to lose first-time home buyers’ tax credit at the end of November,” said Ms. Appleton-Young.

“Inventory will be relatively lean - under six months during the off-season months and a roughly four-month supply during the peak season,” she said.

This year the higher-priced end of the market got little sales action as buyers had trouble securing financing because of the drawn out credit crunch. If this continues into the second half of next year sales could be further impacted, she said.

Foreclosed homes could account for nearly one-third of sales next year, said the association’s chief economist Leslie Appleton-Young. She forecast that sales will be driven by distressed properties in the low end of the market, causing a shortage in the number of homes for sale at that level and a moderate home-price appreciation. It will continue to be hard to sell higher-priced houses because values have dropped and financing is hard to get.

Ms. Appleton-Young noted that it appears that lenders are now closely monitoring the flow of distressed properties onto the market but there could more downward pressure on prices if there is another heavy wave of foreclosures next year.

“The wild cards for 2010 include foreclosures, loan resets, the labor market, and the California budget crisis, as well as the actions of the federal government,” Ms. Appleton-Young said.