IS SOUTHERN CALIFORNIA IN REAL ESTATE BUBBLE? WE WON'T KNOW TILL IT POPS.

Byline: GREGORY J. WILCOX Real Estate

There has been speculation lately about Southern California being encapsulated in a real estate bubble, which surprises a couple of expert market watchers.

``Everyone is concerned about this,'' muses Michael Carney, director of the Real Estate Research Council at California State Polytechnic University, Pomona. ``My opinion is one cannot tell one is in a bubble while one is in it. I don't believe you can tell you're in a bubble until it bursts.''

In other words, if the bubble exists it's so opaque we can't see in or out of it.

Los Angeles-area economic guru Jack Kyser is even more direct.

``No,'' he said, offering a one word answer as to whether the real estate market is in a bubble-like state.

Kyser, chief economist of the Los Angeles County Economic Development Corp., said that for the future we can be spared any bubble blathering for a variety of factors like strong demand, a tight supply and paltry amount of new home construction.

For example, during the first six months of the year there have been permits issued for 7,519 new housing units in the county, a steep 25.3 percent decline from the year-ago period.

Meanwhile, the population continues to grow.

From the time the April 2000 census was released until Jan. 1 this year, the county's population increased by 306,000 people. During that time, only 35,000 housing units were permitted.

``And we don't know how many units were lost to demolition,'' Kyser said. ``So you have a shortage overall of housing and if you are trying to find a specific type of housing, the shortage gets even more intense. We're not building enough new housing.''

Actually, this bubble business is misdirected, a carryover perhaps from the implosion of the dot-com sector and its price-to-fantasy ratio that ran stock prices up to unrealistic, and unsupported, levels.

This kind of speculation is about whether the market has peaked in terms of both sales and prices. Hindsight is the only way to view peaks so we've got to wait a while to make an accurate assessment.

However the evidence suggests we're not yet close to hitting a peak, either in the San Fernando Valley are or in all of Southern California.

More evidence should be forthcoming on Monday, when the Southland Regional Association of Realtors issues its July sales and price report. It will likely show another record median price and strong sales counts.

Carney also notes that now home prices are growing faster than personal income. But affordability is being tempered by low interest rates.

And a federal Labor Department report issued Friday shows inflation remains in check, so this favorable interest rate environment should linger.

``Looking into the future, you never really see what's going to happen. But at this point, I don't see anything that will cause interest rates to rise rapidly,'' he said.

His long-term view is that in about a year from now, housing resale prices will flatten out.

But they will be flattening out at a pretty high level.

So right now no one can say with any certainty how big the real estate bubble might be. But we can expect the market to maintain its momentum, at least till year's end.

``It should just keep chugging along because interest rates are still very favorable and we don't think there will be any significant bump up until next year. And the (new residents) just keep coming,'' Kyser said.