WHERE HOUSING IS HEADED

Inventory of condos in San Diego and Miami are at 27 month sales rates. Flat to lower prices nationwide will naturally lead to higher floclosure rates. People should not be surprised. You simply don't have to lose your home to foreclosure if you can sell in the open market as prices rise. And, they have been rising for many years now.

The average 30-year mortgage rate was 6.14% last month, down from 6.24% in November, according to Freddie Mac. Inventories of homes fell 7.9% at the end of December to 3.51 million available for sale, which represented a 6.8-month supply at the current sales pace. 6 month inventory represents equilibrium.

Some of last year's strongest housing markets now are showing signs of cooling a bit. In the San Francisco Bay area, the median price paid for new and resale homes in December was $612,000, up just 0.5% from a year earlier, according to DataQuick. One of California's weakest markets last year was the Sacramento area. Anthony Graham, an analyst at Trendgraphix Inc., a provider of housing data, says sellers of previously occupied homes there have had trouble competing with the huge discounts and incentives offered by builders.

Better days are forecast for Phoenix, but at a cost. Follow the employment outlook as a predictor for a market's future health:

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A quarterly survey of housing conditions in 28 major metropolitan areas by The Wall Street Journal showed that the inventory of unsold homes at the end of 2006 was up substantially in nearly all of the markets from the already plentiful level of a year earlier. The biggest increases were in the metro areas of Miami-Fort Lauderdale, Orlando, Tampa and Jacksonville, Fla.; Phoenix; and Portland, Ore. (Unlike the other cities, Portland had a lean supply of homes a year before.)

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