An entrenched slowdown in sales and a pileup of resale inventory is taking its toll in the capital region as, for the first time since the late 1990s, median sales prices for homes in Placer and Sacramento counties dipped below the previous year's levels. "That couldn't be sustained indefinitely," said Stuart Gabriel, director of the Lusk Center for Real Estate at the University of Southern California. "We couldn't see a general rate of inflation at 3 percent annually and home price increases of 25 percent a year. The party had to come to an end, and the Fed (Federal Reserve) has purposely brought the party to an end with a tightening of monetary policy." Dolores Conway, director of the Lusk Center's Casden Real Estate Economic Forecast, said rising interest rates during the last year have pushed many would-be buyers out of the game. The same income that could buy a $360,000 house in June 2005 bought a $320,000 house last month, she said. Yet gradually falling prices mean the market is coming back their way, said G.U. Krueger, chief economist with Irvine-based housing investor IHP Capital Partners. "What I'm hearing is people are waiting and seeing," he said. "To some degree that's good news. It means there's a pool of buyers out there that might jump in when prices bottom out."
