LoyaltyisaCurse

By Gina Keating Mon Aug 15, 7:33 PM ET

LOS ANGELES (Reuters) - Home prices in Southern California rose to a record in July but the pace of gains slowed in San Diego, considered a bellwether for the region's superheated housing market.

The median price of a home sold in Southern California, one of the hottest U.S. housing markets, increased nearly 17 percent in July to $469,000 from $402,000 a year earlier, a report issued on Monday by DataQuick Information Systems said.

But home prices in San Diego, which led the region's run-up in prices, rose just 5.1 percent, leading experts to warn that housing prices could level off in coming months.

"I think it shows that the market here is softening a little bit," said Alan Gin, an economics professor at University of San Diego. "San Diego was advancing more rapidly than other places and we may be topping out first."

Alan Nevin, chief economist for the California Building Industry Association, said San Diego's prices actually peaked last summer and fall with frenzied buyers bidding well above sale prices. Growth in housing prices has been declining across California since then, he said.

"It means we are going back to normalcy -- 6 to 8 percent appreciation in a good economy," Nevin said of the report. He doubted, however, that the U.S. market as a whole would see as dramatic a slowdown.

"The rest of the country never went through what we went through to begin with," he said.

The other five counties surveyed in the report posted double-digit gains in housing prices, and all but Orange County saw fewer homes sold in July than in the previous year.

Home prices in California have almost doubled since 2001, creating jobs and income but also prompting concern of a "bubble" among some analysts.

A median-priced house in California in June cost almost $543,000, more than twice the median price of just under $219,000 in the United States as a whole.

BURSTING BUBBLE?

"We're watching the market carefully for any signs of a turn, for any signs of the 'bursting bubble' that some analysts have been predicting. So far we're not seeing anything other than the normal incremental changes you would expect in the ebb and flow of a real estate cycle," said Marshall Prentice, DataQuick's president.

Gin agreed that an imminent sharp drop in prices was unlikely. "What I don't see is a collapse in pricing. To get a collapse ... there would have to be a big job loss where people are forced to put their houses on the market for distress sales," he said.

The rest of the U.S. housing market could begin to see a slowing in growth in some markets. The cooling in San Diego County was driven by rising interest rates, a lack of affordable housing and a growth in lower-paying jobs, he said.

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