January’s slowdown in home prices is being seized by some economists as a sign of a weakening housing market, but realtors say that buyers are still getting into heated bidding wars.

Last month, the median price of an L.A. County home rose 17 percent year-over-year to $414,000 the smallest increase in nearly two years, according to DataQuick Information Systems.

Overall home prices, along with sales volumes, have been flat countywide for six consecutive months, leading some economists to proclaim that the Los Angeles housing market is stuck in neutral. The general consensus is that year-over-year increases could shrink to 15 percent or less, compared with the 25 percent or greater year-over-year increases that have been the norm.

“We have evidence the market is cooling,” said Christopher Thornberg, a senior economist at the UCLA Anderson Forecast, who has said for the past year that the market is in a bubble. “It’s clear the market is starting to slow down.”

Just last week, Cleveland-based mortgage lender National City Corp. released a report that found Los Angeles home prices were over-valued by 32 percent, the fourth-highest such market in the country. The conclusion was based on factors such as population density, incomes and interest rates.

Still, realtors complain of not having enough homes to sell for the number of buyers on the market. The California Association of Realtors reported last month that the inventory of homes listed for sale had shrunk to a low not seen for six months.

Realtors say that buyers, many motivated by a fear of a looming spike in mortgage interest rates, are aggressively pursuing homes on the market.

Sam Solaimani, a realtor in Coldwell Banker’s Beverly Hills office, said he already has nine offers on a Westwood house listed last week the highest one $80,000 above the $995,000 asking price.

“I don’t know where they get these numbers from,” Solaimani said of the DataQuick figures. “What I see every day is that everything is sold and there’s no new listings. It’s not just the Westside, it’s everywhere. People are going crazy for anything on the market.”

Defying odds

Analysts say one reason for the mixed conclusions is that figures from January and February aren’t good prognosticators of how residential real estate is shaping up for the remainder of the year. “The March numbers will be highly predictive but we’re a little careful to read anything into this yet,” said John Karevoll, a DataQuick research analyst.

To date, the housing market in Southern California has defied many expectations. For more than a year, economists have expected that the market would cool off and mortgage interest rates would rise. As rates inch higher, it’s anticipated that fewer buyers will enter the market and housing prices will cool due to less competition.

But instead of rising, interest rates have remained flat.

At the end of last year, the rate on a 30-year fixed mortgage with no points was about 5.5 percent nearly the same as in 2003. Karevoll believes interest rates won’t affect buyers’ behavior until they top 7 percent.

And he scoffs at studies like that of National City. “There’s a lot more reputable firms with egg on their face,” he said. “In the past few years that model doesn’t track behavior any more.”

Especially clouding economists’ projections is the uncertainty surrounding interest rates, stemming from the impact the growing federal trade deficit and the ballooning national debt could have.

Wildly fluctuating economic conditions such as job creation, income levels and personal savings make it hard for economists to make long-term projections.

“We’re surprised those elements haven’t kicked in as much as they have, but it’s in the cards that the rate of appreciation will come down eventually,” Karevoll said. “The real estate market always goes in cycles and we’re approaching the end of this one but nobody knows for sure how much longer it will last.”

Bubbles burst?

But Thornberg said sales prices have become disconnected from a home’s implied rents the value it could fetch if rented out. Though housing prices may have shot up 40 percent, he said rents over the last two years have only risen marginally.

That, among other factors, makes Thornberg believe Southern California is in the midst of a housing bubble that is ready to burst. Whether that’s a hard or soft landing is anyone’s guess, he said.

“Think about what news over last year would make you believe future home values would rise to the levels they are today and there’s really nothing to support it,” he said.

On the other side, Leslie Appleton-Young, the chief economist with the California Association of Realtors, says that housing appreciation is bound to settle down, but as long as the region doesn’t slip into a recession and continues to add new jobs, the demand for homeownership will remain steady. The only peril is that affordability levels reach a point where only very few can qualify for loans.

In December, only 17 percent of Los Angeles County households earned enough to buy the median-priced home, which is 6 percent lower than year-ago figures, according to the CAR. “We have an affordability crisis,” Appleton-Young said. “We can out-price ourselves from housing.”

Taria Lewis, a real estate consultant with CREE (The Sales Group) in Culver City, said she worries about a possible housing bubble but doesn’t see one bursting anytime soon. She said any listing she has for $500,000 is sold almost immediately.

“Two years ago I would have predicted we had a bubble that would have popped, but it hasn’t happened,” she said. “I still think we have a bubble but I don’t know when or how it’ll turn out.”

Regardless, it’s still widely believed that even if there is a bubble, it won’t burst as quickly as the stock market did after the dot-com implosion. “The housing market is the supertanker of the economy so it doesn’t turn on a dime,” Karevoll said. “It takes months and months for something to happen.”