Oct. 7--The California Association of Realtors is forecasting sales of single-family homes will dip slightly and prices will rise modestly next year, amid high unemployment and the loss of a tax incentive.

The trade association issued its 2010 housing market forecast Wednesday, which calls for sales to decrease 2.3 percent from this year to 527,000.

The group projects the statewide median price will hit $280,000, up 3.3 percent from the projected 2009 median of $271,000.

North San Diego County real estate prices have been improving steadily since February, according to the North San Diego County Association of Realtors monthly HomeDex report. In the 12 months from August 2008 to August 2009, the median single-family detached house rose to $450,000 from $436,000, an increase of 3.33 percent.

Robert Kleinhenz, deputy chief economist for the CAR, said he sees improving health for the housing markets in Southwest Riverside and North San Diego counties as the number of foreclosed and short-sale properties drop.

"The percentage of distressed properties in these areas is going way down," he said. "That's a good sign."

Kleinhenz said in February in California, 58.8 percent of sales were distressed, but that in August that figure had dropped to 38.9 percent. The drop-off should be even greater in markets such as Riverside County where as much as 80 percent of properties on the market were in some kind of distress earlier this year, he said.

California home sales bottomed in late 2007 at 346,900 units, but have turned around since then, fueled largely by sales of foreclosed homes and a federal tax credit.

First-time buyers can save up to $8,000 in taxes if they purchase before the end of November. Real estate agents, homebuilders and others are lobbying Congress to extend the credit into next year, but its unclear if lawmakers want to continue to subsidize the market.

The loss of the tax incentive coupled with rising unemployment -- already above 12 percent in California -- will put some potential buyers back on the sidelines, said Leslie Appleton-Young, the association's chief economist.

"Those two things might dull the prospect for sales a little bit," Appleton-Young said. "But the drop is very modest and you're still looking at a robust level of sales."

Many lenders have put a moratorium on foreclosures, causing a drop in the number of discounted, bank-owned properties hitting the market this year. Some economists expect that wave of foreclosed properties could hit the market next year, dampening home prices again.

Appleton-Young projects foreclosed homes and other financially distressed sales will account for about one in three sales next year.

"We'll see a heightened level of foreclosed properties over the next couple of years," she said.

The Associated Press contributed to this report.

-----

To see more of the North County Times, or to subscribe to the newspaper, go to http://www.nctimes.com.

Copyright (c) 2009, North County Times, Escondido, Calif.

Distributed by McClatchy-Tribune Information Services.

For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.

A service of YellowBrix, Inc.