The California Association of Realtors (CAR) may not have to eat too much crow after all.

Leslie Appleton-Young, chief economist for the Golden State's realtor association has had to revise her forecast to include a larger than expected decline in California's home prices this year.

But a new $152 billion economic stimulus package from the U.S. Congress could provide mortgage relief to home buyers in California and other high-cost housing markets.

If that happens, California's home prices may not fall as much as predicted in the new forecast.

Last year, Appleton-Young forecast the median price of homes would tumble by 4 percent this year in California.

Recently, she confessed the need to eat her own words when she revised the forecast to a projected 8 percent to 10 percent drop in prices.

Stephen Levy of the Center for Continuing Study of the California Economy, based in Palo Alto, CA said Appleton-Young's revised estimate is more accurate, but still off the mark.

Levy says a 10 or 15 percent decline in the state's median home price would be more likely this year. With a high rate of foreclosures, high-cost housing and tight money conditions, California is in the thick of the housing downturn.

Appleton-Young said falling prices can be a good thing. The faster home prices fall, the faster the market will hit bottom.

H.R.5140 called the "Economic Stimulus Act of 2008," is designed to stimulate the economy and it has a provision that could cause Appleton-Young to revise her forecast again -- back to a smaller median home price decline in California.

The same legislation that will send tax rebate checks to millions of Americans later this year, and offer other economic stimulus will also raise the conforming loan level in high cost states from $417,000 to $729,750.

That will allow Fannie Mae, Freddie Mac, and the Federal Housing Administration to back more mortgages.

The new law will allow many more home buyers in California will likely be eligible for conforming loans, which carry lower interest rates than non-conforming or "jumbo" loans.

However, some critics aren't so sure the new loan levels will do much to save California's housing market.

Buyers still have to meet tight lending standards that often require no more than 35 percent of a household's gross income can be used for the mortgage payment.

The median price in many areas ($743,500 for Silicon Valley in January) are so high, median income earners still won't qualify for loans despite higher limits.

Only some buyers in the Golden State and elsewhere, including the metro areas of New York, Boston, Los Angeles-Orange County, San Jose-Santa Clara in California, and Washington, D. C., will benefit, according to a Deutsche Bank report by Nishu Sood, a homebuilding analyst.

Marginal impact may occur in Miami, Sacramento, and California's Inland Empire region. The report said prices aren't high enough in Phoenix, Las Vegas, Chicago and most major Southern markets, including Houston and Dallas to make a difference.

There's also a question of declining home values and existing "upside down" mortgages that are now larger than the home is worth. Already skittish lenders aren't going to look favorably on refinance loan applications for those properties.

And, right now, the increase in the conforming loan level expires on Dec. 31, 2008.

Published: February 20, 2008

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Broderick Perkins parlayed a career in old-school journalism into a contemporary digital news service that really hits home. The award-winning consumer journalist, originally from Wilmington, DE, is founder, publisher and executive editor of the bootstrap DeadlineNews Group, a Silicon Valley-based editorial content and consulting service specializing in residential real estate, consumer news and related editorial consulting services. The DeadlineNews Group includes the website, DeadlineNews.com, offering real estate editorial content and consulting services, and its back shop, the Deadline Newsroom, an open house on news that really hits home. Perkins obtained his formal journalism education from University of Delaware and a journalism boot camp, the Institute of Journalism Education at the University of California-Berkeley. He went on to 20 years of service as a daily newspaper journalist at the Wilmington, DE News Journal and San Jose, CA Mercury News. Perkins covered housing on the San Jose Mercury News reporting team which earned a General News Reporting Pulitzer Prize in 1989 for coverage of the Loma Prieta earthquake. He has also produced real estate, consumer and small business content for the Wall Street Journal, Los Angeles Times, RealtyTimes.com, Nolo.com, Better Homes and Gardens, the National Association of Realtors, Homestore/Move and Intuit/Quicken among more than three dozen publications. In addition to managing the DeadlineNews Group, Perkins most recently served as chief editorial consultant for Nolo's Essential Guide To Buying Your First Home, Nolo, and writes real estate television scripts for RealtyTimes.com.