The median price of an existing, single-family detached home in California during July 2004 was $463,540, a 21.4 percent increase over the revised $381,940 median for July 2003, the association reported. The July 2004 median price decreased 1.1 percent compared to a revised $468,620 median price in June 2004.

"While year-to-date sales have increased 7.4 percent, we expect to see them level off in the coming months as increases in the supply of homes and interest rate expectations temper consumers' concerns about the recent pace of the real estate market," said Leslie Appleton-Young, California Association of Realtors vice president and chief economist.

Greater than expected sales of existing homes in the first seven months of the year will help set a record for annual existing-home sales in 2004, according to the National Association of Realtors. Existing-home sales will increase about 6.5 percent this year.

David Lereah, National Association of Realtors chief economist, said a continued decline in mortgage interest rates is creating favorable market conditions at a time when household formation is rising. Though the national association projects the 30-year fixed-rate mortgage to slowly rise to 6.0 percent in the fourth quarter, the average rate for the entire year should be 5.9 percent, the second-lowest annual average since the mid-1960s. The lowest rate in recent years was 5.8 percent in 2003.

Thirty-year fixed mortgage interest rates averaged 6.06 percent during July 2004, up from 5.63 percent (revised) in July 2003, according to Freddie Mac. Adjustable mortgage interest rates averaged 4.11 percent in July 2004 compared to 3.57 percent (revised) in July 2003.

"Price appreciation is projected to be only slightly higher than historic norms next year, as supply levels come closer to market demand. Although we expect the number of home buyers to continue to exceed the number of sellers, the situation should improve in 2005," Lereah said.

The national median existing-home price for all of 2004 is expected to rise 7.5 percent to $182,700. At the same time, the median new-home price will grow by 8.9 percent to $212,300. "Home prices will continue to rise above historic norms as long as we have tight inventories of homes available for sale," Lereah said.

The U.S. gross domestic product is expected to grow by 4.5 percent this year, while the Consumer Price Index should rise by 2.7 percent.

Inflation-adjusted disposable personal income is forecast to increase 2.9 percent in 2004, while the consumer confidence index should trend up to 105 by the fourth quarter.

Compared with the national averages, California median home prices are off the chart. Statewide, the 10 cities and communities with the highest median home prices in California during July 2004 were: Laguna Beach, $1,479,500; Los Altos, $1,343,000; Manhattan Beach, $1,320,000; Newport Beach, $1,295,000; Burlingame, $1,250,000; San Marino, $1,200,750; Coronado, $1,182,500; Saratoga, $1,105,000; La Canada­Flintridge, $1,075,000; Beverly Hills, $1,013,000.