The California Association of Realtors, which has been bullish on the state's housing market all year, is raising a yellow flag.

Home prices in 1998 will not go up as smartly as they have in recent months, the group warns in a report to be released today.

The pace of home sales and price appreciation in California will be dampened by Asia's financial turmoil, says economist G.U. Krueger in the report.

The economist emphasized that he does not foresee a collapse in home prices but that some overly optimistic investors could be hurt.

"Some of the sharp bidding-up of land prices just now emerging in Orange County and other Southern California counties could prove to be somewhat speculative," he says.

In fact median home prices did rise 10.1%, year over year, in October, according to the California Association of Realtors.

It was the first time since 1989 that prices had risen at a double-digit pace.

In Orange County, where prices were falling as recently as last year, prices rose almost 11%.

To many, October's numbers were convincing proof that California's housing market had finally returned to a time of heady growth, Mr. Krueger said in an interview last week.

It "raised expectations that we are going to have a continuation - even an acceleration - of this next year," he said.

But the slowdown in Asia means double-digit increases aren't in the cards-certainly not in Orange County-because California's export-intensive economy also will slow down, Mr. Krueger said.

He said he expects median prices to rise 4% in California next year.

One major investor in Orange County-Miami-based Lennar Corp.-sees things differently. Jonathan Jaffe, president of Lennar Homes California, said he thinks the effect of a drop in exports would be offset by revenue from the handling of increased imports at California's ports.

Moreover, he said, California real estate would benefit from investments by Asians looking for a safe haven from their devaluing currencies.

"I don't see any reason why what has happened in 1997 won't continue in 1998 and even be stronger," Mr. Jaffe said of the pace of property appreciation in California.

A separate report issued last week by Bank of America's chief economist, Howard L. Roth, explained why California is likely to be hurt harder than other regions by a slowdown of exports to Asia.

"Exports to Japan, South Korea, Taiwan, Singapore, Hong Kong, Malaysia, Thailand, the Philippines, China, and Indonesia made up 51% of California merchandise exports in 1996, as compared to 29% of U.S. merchandise exports," Mr. Roth said.

"As a share of economic output, the contrast is even sharper: 5.4% of California gross state product versus 2.4% of U.S. output," he said.

California's housing market has enjoyed plenty of good news this year thanks to strong job growth and a stanching - and possible reversal - of emigration from the state.

In the third quarter, home prices went up 6.9% from a year earlier. Most counties in the state reported an increase.

The market's recent strength gave Mr. Roth and Mr. Krueger hope that Asia's troubles would only sting-not burn-California.

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