SOUTHLAND'S HOUSING PRICES MAY COME DOWN - OR NOT.

Byline: GREGORY J. WILCOX Real Estate

Los Angeles County's housing outlook, brought to us by UCLA's Anderson Forecast, calls for interest rates rising and home prices falling by the mid- to the latter part of the year.

Maybe.

It's just a forecast, and like the weather, is subject to change.

Christopher F. Thornberg, the senior economist at UCLA who put together the quarterly forecast for the Los Angeles area, estimated that interest rates will climb to 6.4 percent by the end of next year, higher than they are now but not high enough to derail the residential housing market.

That's good news since the housing sector has been and will be one of the economy's brightest lights.

``The question that has been on everyone's mind is whether the current prices have reached a point yet at which they could come crashing down, not unlike (how) they did in the early '90s,'' Thornberg said in his report, part of a broader forecast that meaningful growth probably won't start until 2005.

By summer he expects that the county's median price, the point at which half the homes sell for more and half for less, will rise to the mid-$300,000 range and then start falling. At the end of 2004 the median is expected to retreat to the $320,000 range.

Maybe.

Thornberg also said there are some similarities between now and the late 1980s, the prior spate of tremendous price appreciation. Between 1986 and 1989, residential prices in the county jumped by 65 percent. And since 1998 they have risen by 75 percent.

``So, are we currently experiencing a real estate bubble?'' Thornberg wondered. ``Is the inevitable pop going to come for sure?''

Probably not.

The bubble did burst in the 1990s and prices did tumble. Overspeculation in the market and the Northridge Earthquake in 1994 got most of the blame.

But there is a big difference between then and now.

Thornberg pointed out that, in the rental market, rates are moving up because of tight supply and mortgage rates are falling because of interest rate cuts.

``These underlying fundamentals were not present in the late '80s and clearly did not support the increase in property values seen then,'' he wrote. ``Hence this tends to suggest that the market is not in a bubble, at least not at this time.''

And there is some suggestion that the housing market might not perform as Thornberg has predicted, a concept even he agrees with.

For example, last week the interest rate for a traditional 30-year fixed- rate mortgage fell to a record low of 5.61 percent. It was the fourth consecutive weekly decline and the fifth record low this year.

At Freddie Mac, the big mortgage company, the projection is that rates will average 5.7 percent through the third quarter of this year and not move much at all through next year.

And the Mortgage Bankers Association of America saw its index that measures refinance activity broken by a wide margin, an impressive happenstance since the refinance boom extends all the way back to the beginning of 2001.

This adds to the economic churn - and suggests that prices will continue to creep up and not retreat.

Amy Crews Cutts, deputy chief economist at Freddie Mac, said Americans who have recently refinanced will save an estimated $10 billion in mortgage payments, while others tapped their home equity for $90 billion.

In most cases, that money is being plowed back into the economy.

Meanwhile, John Karevoll, an analyst at DataQuick Information Systems, which tracks the real estate market, noted that this year is off to a strong start.

He doubted that Thornberg's forecast would bear out and did not quibble with the Freddie Mac rate outlook.

``If anything, the rate of appreciation will ease back,'' Karevoll said. ``But I don't think we're going to hit a peak and then prices are going to come back. I just don't see that happening.''