DOWN FROM THE PEAK; REALTORS: FEWER HOME SALES, BUT HIGHER PRICES IN '99.

Byline: Gregory J. Wilcox Daily News Staff Writer

When you reach the top of the mountain, going back down is your only option. And that's just where California's home sales are headed in 1999, according to a forecast released Wednesday by the state's Realtors group.

With slightly less than one quarter still left in 1998, single-family home sales are expected to hit a record high 615,000 units this year then decline by 8 percent in 1999, said the California Association of Realtors. The previous record was 604,953 in 1978.

This is not necessarily a bad thing.

``If they are predicting resales of 8 percent less than the all-time record it sounds like they're still predicting a pretty good year. I'm not uncomfortable with their forecast,'' said Bruce Smith, an economist with the California Department of Finance.

The Realtors group characterizes its sales estimate as a ``more sustainable level'' than 1998's blistering pace.

Prices, on track for a 10 percent gain this year, are forecast to have more moderate growth of 4 percent in 1999. The median price, the point at which half the homes sell for more and half for less, made double digit gains in eight of nine months this year.

``The California housing market of 1998 made a dynamic transformation which will continue into next year, although we will see a dip in the number of units sold,'' association President Tim Corliss said in a statement.

G.U. Krueger, the association's deputy chief economist, said the sales slowdown will likely coincide with deeper impact of the Asian financial crisis on California's shore.

This could result in economic growth slowing from its present pace of about 3.5 percent to a more moderate 1.8 percent.

``I think it will put a little damper on sales. There will still be enough demand to maintain the home price appreciation,'' Krueger said.

Smith said that changes in the federal capital gains tax law may have helped propel sales to their record level.

This year, homeowners in all but the highest tax bracket were allowed to sell their homes and pocket all of the profits.

``There was some unlocking effect of the capital gains tax for homeowners,'' Smith said. ``Next year you have no new unlocking effect.''

Historically low mortgage rates also enticed many buyers into the market.

Smith also is not alarmed by the slowing of the state's economy.

``It certainly shouldn't be viewed as a big problem. It's just retreating from a very fast growth rate to a more moderate rate,'' he said.

'99 OUTLOOK

Home prices are expected to continue increasing next year even while sales volume slows down.

Year 1997 1998 (x) 1999 (xx)

Median prices $186,490 $205,140 $213,350

Home sales 555,380 615,000 565,800

Building permits 111,716 129,000 150,000

(x) Projected

(xx) Forecast

SOURCE: California Association of Realtors

CAPTION(S):

Box

BOX: '99 OUTLOOK (see text)