... as reported by the California Association of Realtors and referenced in this column last week Psychological factors have contributed to the decline, in combination with rising interest rates and record level prices. The market seems to be stabilizing at more normal levels of activity, as reflected by consistency in the number of homes on the market. There was a sharp increase in inventory levels in the second quarter of the year over the first quarter, and it appears that these have maintained at consistent levels over the last three months.

The level of activity in the mortgage market also indicates a normalization of the real estate market.

The Mortgage Bankers Association reported this month that the mortgage activity had increased by 1.8% over the previous months numbers, and that the percentage of adjustable rate mortgages had decreased. This indicates that the consumer is looking at locking in the current rates so that they can be assured of consistent payments for a longer period of time, further reflecting the retrenchment of the homeowner.

The more reasonable rates of sales of homes and the larger percentage of borrowers opting for fixed rates indicates that the speculative part of the real estate market has been "shaken out", and we should see more normal rates of appreciation- 3% to 7% annually-for property values.