California Cool

Housing begins to slide In California, where the rise in housing prices has been stratospheric, couples have long been willing to sell their souls to the savings and loan -- and rent out mother-in-law for window cleaning -- in order to realize their dry-wall dreams. But now there are definite signs of slowdown in that willingness to shell out small for tunes for not-so-special homes.

Southern California single-family building permits in August dropped by nearly half, from 7,941 to 3,754, compared with the same month of last year. San Bernardino County, in the Los Angeles suburbs, reports its first housing oversupply since 1973-74, and the Federal Home Loan Bank of San Francisco says it is experiencing the largest decline in mortgage lending in 2 1/2 years.

The slump is not across the board. The Golden State, like the rest of the country, continues to have a modest housing high in the "affordable" $55,000 to $75,000 price range. But buyers are beginning to resist the three-bedroom tract house squished onto a postage-stamp lot for $122,900 -- and a 10% mortgage rate. Ob serves David Shulman, a member of Governor Jerry Brown's housing task force:

"There's just a limit to the price prospective homeowners can or are willing to af ford. It is simple economics that house prices can't climb faster than paychecks forever."

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