The UCLA Anderson forecast said home prices will continue to fall, but the market will likely hit the point where it bottoms out before the end of the year, giving more people reason to buy homes.
An economist with the study said while we still hear talk of a recession, California will not see the type of job loss that typically go with a national recession.
"Though you still hear talk of recession these days, it does not appear that California will exhibit the kind of job loss that typically goes with a national recession," economist Jerry Nickelsburg of the UCLA Anderson Forecast wrote in a quarterly assessment.
"Indeed, for California this is primarily a housing-related adjustment to a very overheated speculative market. The carnage is palpable but contained as California benefits from some very traditional industries and its position in the sun on the edge of the Pacific Rim."
While the economic forecast remains gloomy, it will not spiral out of control, and jobs in the Southland that have been lost will be replaced, especially in areas like Orange County.
City News Service contributed to this story.