SUMMER TO STIR MORE BUBBLE TALK IN REAL ESTATE CIRCLES.

Byline: GREGORY J. WILCOX

Summer is bearing down on us, so expect chatter about a real estate bubble to heat up.

UCLA economists, in a harmonic convergence of deja vu, will dissect the market's future during their June 21 Anderson Forecast. That will be exactly one year after they devoted a forecast session to the possibility soaring home prices in California had reached the point where the bubble could burst.

``The recent surge in price creates a clear bubble ... despite tight supply. Eventually there needs to be some return to sustainable price levels - likely when interest rates continue to rise through 2004,'' that forecast said.

The market didn't pay much attention, though. Prices kept climbing amid strong sales, and interest rates didn't spike.

Last week's survey by Freddie Mac found that the interest rate on the benchmark 30-year fixed mortgage averaged 5.77 percent, up slightly from a week earlier and the first increase in five weeks.

But a year ago last week it averaged 6.34 percent.

Rates this year peaked at 6.04 percent the week of March 31.

There is the same general tone to market musings this year as last. Rates are expected to rise, though probably not to uncomfortable levels. And year over year price gains won't be as big as in the past.

So next month UCLA will be discussing:

--How long can this market last?

--Are we in for a soft landing or a crash?

--Who is likely to be left holding the bag when the smoke clears?

Some market watchers believe residential real estate in California still has some legs under it, the landing will be soft and buyers who purchased at the top will feel the most anxiety.

The ``when'' part of the scenario is the most clouded.

``You can't time a bubble. It's very capricious,'' notes UCLA economist Christopher Thornberg, who handles the California part of the university's forecast.

Analysts were certain in 1998 that the Nasdaq price-to-fantasy experience was over, but that market didn't break for two more years, he said.

And there is concern now that thanks to easy credit some buyers are getting into a market where they don't belong. Thornberg says the danger comes from interest-only loans and adjustable products that feature lower monthly payments and help buyers qualify for high-priced homes.

That said, Thornberg believes prices will eventually hit a plateau that could last for maybe 10 years.

``I don't expect prices to plummet anytime soon. It won't be a dramatic fall in prices,'' he said of the likely market turn.

That sets up the possibility that June could be a watershed month. Last June the median price for the San Fernando Valley was a then-record $505,000, so it will be interesting to see what the annual rate of appreciation will be next month. June's spread could set the tone for the future, especially since the Valley's median price has been half a million dollars or higher for four consecutive months.

Prices tend to move up and down month to month, but annual gains of around 20 percent had been the norm. In March, the Valley's median increased 18.8 percent but it hit a record $525,000, the second high-water mark in the year's first three months.

A good indication of where the market's going to go over the next several months comes Monday when the Southland Regional Association of Realtors and DataQuick Information Systems release their April statistics.

Don't expect much change.

A preliminary analysis of April's numbers shows that the median price increased in 29 of 36 ZIP codes across the Valley from the March level. Sales fell in 20 ZIP codes, increased in 13 and remained unchanged in three.

``We're heading into summer and once again activity is taking off and strong,'' said association president Jim Ezell.

Gregory J. Wilcox, [phone]

greg.wilcox(at)dailynews.com