Economists at the UCLA Anderson Forecast said the pace of new home construction will slip in 2005 due to price increases, causing the U.S. economic recovery to slow.

The reason for this, the forecasters said, is the “housing bubble” that is affecting California and the nation. As a result, residential construction is expected to fall sharply nationwide, but only slightly in California. The UCLA analysts foresee the number of residential building permits decreasing in the Golden State to 204,800 next year, from 207,000 this year.

U.S. housing starts are expected to decline to 1.8 million in 2005, from 1.94 million in 2004, while home sales will also fall.

The forecasters said that the cause of California’s housing bubble is excessive price increases rather than over-building. Inflation-adjusted home prices have risen by more than 5 percent annually over the last five years, five times the usual rate. And prices nationwide are now 25 percent above their historical long-term average.

The UCLA economists said the California economy will expand faster overall than that of the U.S. State non-farm employment will likely rise 1.6 percent in 2005, up from 0.8 percent this year, while personal income growth will slow to 5.2 percent from 5.6 percent.