The bubble may not have burst, but it's definitely leaking.

While median home prices in December were up 18 percent to $525,000 in Los Angeles County from December the prior year, unit sales were down 6.2 percent, according to HomeData Corp., a Melville, N.Y.-based company that tracks housing data.

At the same time, December's median price remained the same as the previous month, after a slight up-tick from $520,000 in October but still below a yearly high of $528,000 in September.

The plateau is a notable conclusion to a historic year in the housing market in which year-over-year median price increases have frequently been above 20 percent in Los Angeles County. Overall, the median-priced California home climbed 18 percent in 2005 to $523,150, according to the California Association of Realtors.

"Fourth-quarter sales numbers were below expectations," acknowledged Leslie Appleton-Young, chief economist for the association. "(But) there are a lot of things exogenous to the market that you can point to in addition to rising rates. There was plummeting consumer confidence after Hurricane Katrina and that very (high) average sale price."

So while it's clear that the local housing market reached a plateau at the end of 2005, the bigger question remains: Will prices drop this year? Appleton-Young and some other economists continue to predict a "soft landing."

But the evidence so far is mixed.

The Realtors association's Unsold Inventory Index, or the amount of time it would take to sell all of the houses on the market, was up to 3.9 months in November, from 2.8 months in the year-earlier period. That was the latest data available.

The average index for 2005 was 3.3 months, up from 2.8 in 2004. In addition, inventory levels are expected to continue to rise, especially if mortgage interest rates continue climbing. Already, the Realtors association's Affordability Index fell in October to 15 percent, four points lower than the year-earlier period.

Even so, economists such as Dr. Gary Painter at USC's Lusk Center for Real Estate, which has been notable in its critique of a potential market bust, believe that current data by historical standards portends nothing more than a soft landing unless the economy falls apart, triggering wide job losses.

"Certainly the interest rate environment isn't as favorable as it used to be as we're coming off of two to three years of great sales," said Painter. "(But) right now there's still not a lot of inventory out there and without a lot of inventory you won't see a price decline. Still, we're not going to see the double-digit price increase or people getting above list price."


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