A California Association of Realtors economist predicts California’s housing market may be nearing a bottom after months of plunging sales.

Kleinhenz predicts that home prices will increase 6.5% to 7% this year from 2005 and may drop 2% in 2007. Areas seeing a lot of new-home building “” such as Sacramento, San Diego and parts of the Inland Empire as well as the high- and low-desert region “” are expected to see more price declines over the next few months.

The comment below could apply to Arizona.

The big wild card in 2007 will be how many homeowners decide to sell. If owners rush to market, inventories could balloon, creating more supply than demand and more downward pressure on prices.

I wonder if the effect below is true in metro Phoenix.

But in another sign that the market is starting to stabilize, Kleinhenz said, over the last six months sellers “have become more attuned to the market” and are pricing their properties accordingly.

In April, the median sale price of an existing California home was 10% lower than the original list price. By November, that gap had closed to nearly zero, he said.

I just made a quick check of the local MLS data and I can’t find any such effect in metro Phoenix.