SAN DIEGO - Weakness in the residential real estate market will continue to be a drag on San Diego's economy through 2008, according to a report released today by UCLA's Anderson School of Management.

There are signs that the local real estate market is beginning to stabilize, but the economic "wild card" remains the historic high level of mortgage defaults, according to the UCLA Anderson Forecast.

The Forecast said the combination of slower population growth and rising foreclosure rates suggests that the San Diego area's residential housing market will be weak for at least another year.

"However, the absence of any serious economic weakness in the next two years suggests that a protracted bear market for housing is unlikely," according to the UCLA Anderson Forecast.

"Thus, our forecast for the San Diego housing market is less building, weak sales volumes and flat to slightly falling home prices through 2007, with some improvements starting in mid-2008," the report states.

Employment and income growth in the San Diego region will remain positive but sluggish through 2008 amid a slowdown in the leisure and hospitality industry and construction and mortgage finance sectors.

The UCLA economists who produce the quarterly report will discuss the economic outlook for the nation, California and San Diego during a morning conference at the Manchester Grand Hyatt today.