SALES SLUMP LIKELY TO NIBBLE LITTLE FROM LOCAL HOME PRICE.

Byline: GREGORY J. WILCOX

Staff Writer

After an unprecedented surge, the residential real estate market will be a drag on the San Fernando Valley's economy for the next few years, according to a forecast being released today.

A sales slump that started in the fourth quarter of 2005 shows no signs of moderating, and it is finally exacting a toll on prices, according to a forecast for the San Fernando Valley from California State University, Northridge.

But the sales decline won't create enough pressure to push down prices by any significant amount, thus making the Valley a market where the typical home costs about $600,000.

There will be just a modest increase in demand for housing -- about 4,300 units this year -- and 70 percent of that will be for apartments and condos.

The modest growth in demand, coupled with supply increases, "will be sufficient to kill home price appreciation over the next 12 months and beyond," forecast author Daniel Blake, director of the Economic Research Center at CSUN, said in his report.

Here's the forecast for the Valley's various real estate sectors:

While a residential price collapse is not likely, prices in real terms are now under their year-ago level.

For example, including Burbank and Glendale in the Valley mix, the median house price in March was $620,000, up an annual 1.6 percent. Blake notes, though, that the Los Angeles area rate of inflation is an annual 3.8 percent, which means the real home price slipped 2.2 percent.

"This trend will continue, with probable bobbles and weaves for various months, but generally setting a mildly moderating course," Blake said.

Apartment vacancy rates will remain tight, about 4.5 percent, and rent increases of more than 7 percent are likely.

The Valley currently has one of the nation's tightest industrial vacancy rates, about 1.8 percent, versus 7.8 percent for the nation.

Growth won't meet demand, though, because of a lack of available land, Blake wrote.

After rising in the 2001 recession, the office vacancy rate has fallen steadily since 2003. In this year's first quarter, the East Valley vacancy rate settled at 7.9 percent, down an annual 2 percent.

The West Valley's rate slipped an annual 1.5 percent to 7.6 percent.

Analysts generally consider a market at capacity when the vacancy rate goes below 10 percent, making this an attractive market for landlords.

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