The California Association of Realtors' forecast for home price appreciation of moderate to 10 percent in 2006 may be too conservative--or too optimistic, depending upon who rebuts the trade group's forecast.

Either way, a 10 percent home price growth rate isn't small potatoes, just unusual in California where prices have been rising by as much as 25 percent a year during the last half decade.

In late September, during CAR's Centennial REALTOR Expo in San Diego, the state real estate association released its annual forecast calling for the median home price to increase 10 percent to a record $575,500 in 2006 as sales fall 2 percent compared to 2005.

CAR economists say the state's perpetual supply-demand imbalance will continue to drive the market, but at a moderated level next year as the price of homes push more buyers out of the market.

Each year ends in California with an approximate 50,000 shortfall in housing units, based on the number of new households (250,000) and the number of new housing units constructed (an estimated 200,000 this year), CAR says.

"Declining affordability will constrain sales in 2006 at a greater rate than we've previously experienced, especially in markets where there are higher price points compared with the state as a whole," CAR vice president and chief economist Leslie Appleton-Young said.

Appleton-Young indicated the 10 percent price growth rate is a statewide average forecast.

"Not all areas of the state will continue to experience the unprecedented double-digit median price increases of the past five years. Some high-cost areas, especially those in the more costly coastal regions, face a potential leveling off of median price gains compared with the 10 percent gain we expect for the state as a whole," she said.

But some say the housing shortfall is what makes a 10 percent home price gain appear conservative. It's the supply-demand imbalance that's largely responsible for Golden State home prices growing by 25.16 percent last year and nearly 110 percent in the last five years, according to the Office of Federal Housing Enterprise Oversight.

"Where do we get the idea that the price of houses should be at some particular point?" asked Michael Carney, executive director of the Real Estate Research Council at California Polytechnic University in Pomona, where he's a professor in finance and real estate.

"I have been forecasting a slowing of the current rate, but somewhere in the 15 or 20 percent area. There's nothing to indicate anything otherwise," said Carney, who conceded that "unanticipated shocks," those unforeseen events that appear when least expected, could render economic models useless.

"Of course, you can say anything you want for 2006. Nothing is certain. I emphasize the joker in the deck, but the only thing that's going to cause prices to rise slower is an increase in long term rates and I'm not talking about 8 or 9 percent," said Carney, who for decades has tracked the state market and publishes a California home price survey of residential real estate prices and updates on related economic indicators.

Another longtime state real estate market monitor and "Campbell Real Estate Timing Letter" publisher Robert Campbell says he sees at least two jokers at the top of the deck--unaffordable home prices and "peak oil." Peak oil is the belief that a finite supply of oil in the Earth will soon lead to peak production, but as demand continues to soar, prices for oil and its numerous related uses will reach for the stratosphere.

"I think 10 percent is 10 percent too high. I think we are going into a three- to five-year correction. Some parts of Southern California are already appreciating at only 5 to 6 percent," said Campbell, who for more than 20 years has called the market based on key indicators--interest rates, building permits, home sales, loan defaults, foreclosure sales and other related indices.

He says home prices are already out of reach for too many people as higher oil and oil-related costs are taking ever larger chunks out of households' disposable income.

"It's not just gasoline in your car. Soon it will be heating and utility bills. Flying from California to Hawaii will cost $1,500. That's going to slow us down. Our economy isn't generating jobs and productivity and the type of things to keep economy growing," Campbell said.

In California, only 16 percent of households can afford the median priced home, according to CAR. In nearly a half dozen regions, one in 10 households--or less--can afford the median priced home.

"Yes, the demand is greater than the supply, but at some point people begin to say, 'I don't care if the demand is greater than the supply. I can't afford it and I won't pay it,' " Campbell said.

Indeed, Californians said just that during the state's "great home price crash" of 1990, when prices began to tumble 35 percent to 50 percent.

Should a downturn somehow materialize, he says, history will only repeat itself.

"A lot of people are waiting for the bubble to burst so they can step in and when they do the buying demand will just push prices up again," Carney says.

Real estate writer Broderick Perkins, executive editor of San Jose-based DeadlineNews.Com, writes regularly for this newspaper.