A pair of reports from California. "Sonoma County has the greatest supply of homes for sale in a decade, with a profusion of front lawn for-sale signs that illustrates the housing market slowdown. The sales total for May was the lowest in five years, helping push inventories to 2,008 homes compared with 893 homes a year ago."

"The market slowdown has resulted in a leveling of prices. The county's median price of $603,000 was up 1.3 percent from a year ago but down from a peak of $619,000 last summer. Many buyers, recognizing the market peaked last summer, are wary about paying too much and are backing away from making hasty purchases."

"With twice as many homes to choose from compared to a year ago, buyers are taking their time and that puts pressure on sellers to lower prices, improve their homes and make other concessions, agents said. 'You didn't see that over the last few years. And as a seller they need to adjust to where the market is,' (realtor) Rick Laws said."

The Merced Sun Star. "Merced's housing market is significantly overvalued and teetering on the edge of a downturn, according to a new study. 'Even though I can't tell you where prices are going soon, I can say that the risk of prices declining within the next three years is very high,' said National City Chief Economist Richard DeKaser."

"When prices dip, they'll probably sink about 35 percent to 40 percent over a period of three years, said DeKaser. Local real estate leaders say that decline is already under way. 'It's already been happening, definitely,' said Ray Rodriguez, president of the Merced County Association of Realtors."

"Rodriguez said he first saw prices going down last fall, but he thinks the market should turn around soon. 'I would say in our area, with what we've got going on, I think things will change around within the next three months,' said Rodriguez."

"Buyers seem to disagree. Developers and real estate agents alike have been forced to slash prices lately. Ranchwood Homes dropped the base price on new homes at its Summit Meadow subdivision in Beachwood this week from $324,900 to $314,900, said sales representative Patty Camacho."

"'Almost every [listing] that I have has been reduced,' said real estate agent Mary Gamel. Gamel said she recently reduced the asking price on a McSwain house from $795,000 to $759,000 and dropped a Brimmer Road house from $355,000 to $345,000."

"That's bad news for out-of-town investors who flocked to Merced looking to buy and then 'flip' houses for a quick return. 'To those people, I would strongly caution against buying at this time,' said DeKaser."

"The speculators seem to have gotten the message, said Mayor Ellie Wooten, who sells real estate when she's not sitting on the City Council. 'For a while there it was like a feeding frenzy and I don't see that happening now,' said Wooten. 'You don't see a lot of speculators now. They're aware of what's going on.'"

"Real estate remains a good investment, Rodriguez said. 'I don't think the bottom is going to fall out and prices will go much lower,' said Rodriguez. 'Over the long run, they're going to go up. It's hard to see how it can happen, but they've been going up since the beginning of time.'"