STATE HOUSING MARKET SLOWS FIRST SINGLE-DIGIT PRICE GAINS SINCE 2001 SIGNAL SOFTENING.

Byline: GREGORY J. WILCOX Staff Writer

California's residential real estate market continued its decline in May with the median housing price making its first single digit increase in more than six years and a trade association on Monday issuing a big downward revision in its 2006 sales forecast.

The California Association of Realtors now expects the sales total this year to fall an annual 16.8 percent, 14.8 percentage points more that last September's forecast.

That would be the steepest drop since a 30.2 percent plunge 24 years ago.

But even if sales soften as much as predicted, 2006 would still be the seventh strongest year since record keeping began 38 years ago, said Robert Kleinhenz, the association's deputy chief economist.

And he notes that while sales are well below last year, those were exceptionally high totals.

The association made its initial 2006 forecast based on the first seven months of strong sales in 2005, he said.

But then the market turned and sales have been under year-ago levels every month since the beginning of the fourth quarter in 2005.

Kleinhenz puts part of the blame for the decline on eroding consumer confidence and rising energy costs and interest rates.

``We will probably take our entire hit in sales declines this year,'' he said.

The association tracks monthly sales on an annualized basis. That means that if the market matched May all year, 488,260 previously owned single-family homes would change owners.

Sales fell in all 20 major markets tracked by the association. The declines ranged from a high of 44.4 percent along Santa Barbara County's south coast to a low of 2 percent in Santa Cruz County.

Year-to-date sales are down 19.5 percent, the association said.

Meanwhile, the statewide median price increased 8 percent to $564,430. Prior to May the last single-digit increase came in November 2001, the association said.

The median price, the point at which half the houses cost more and half less, fell in four markets.

Santa Barbara County's median fell 9.3 percent to $677,630; north Santa Barbara County fell 3.2 percent to $453,330; Santa Cruz fell 0.3 percent to $755,000; and the Palm Springs/Lower Desert area declined 3.54 percent to $374,830.

The last time the latter happened was during an 18.6 percent annual price drop in July 1999.

The association anticipates that the median price will increase 8 percent for all of this year.

``Interest rates, while still historically low, continue to impact sales as did the inventory of homes for sale, which reached nearly a six-month supply in May,'' said Vince Malta, the Realtors group president.

The inventory build up is a result of slower sales and more listings and this contributes to moderate price increases.

The report also showed that:

In Los Angeles County sales fell an annual 11.6 percent and slipped 2.6 percent from April. The median price increased 13.5 percent, the second biggest gain in the state, to $568,550 and rose 0.2 percent from April.

In Ventura County the median price increased an annual 3.2 percent to $688,440 and inched up 1.1 percent from April. Sales fell an annual 27.8 percent but increased 13.4 percent from the prior month.

In the High Desert, which includes the Antelope Valley, the median price increased 17.5 percent year-on-year to $332,080 while slipping 0.8 percent from April. Sales fell 14.3 percent annually and increased 9.4 percent monthly.

During May, 30-year fixed mortgage interest rates averaged 6.6 percent, up from 5.72 percent in May 2005, according to Freddie Mac. Adjustable mortgage interest rates averaged 5.63 percent in May 2006 compared with 4.23 percent in May 2005.

``This is kind of the apex ... of the curve. There is no doubt we've been expecting this. We thought it would happen earlier,'' said John Karevoll, an analyst for La Jolla-based DataQuick Information Systems, a market tracker.

He expects the coming months to bring a mix of annual price gains and declines, suggesting a price plateau is fast approaching.

However some markets, like Los Angeles County, continue to surprise.

``L.A. County still has a bit of gas in the tank. L.A. County as a whole may still see another few months of price appreciation,'' he said.