LOS ANGELES - The entertainment industry, the housing market and retail face significant challenges in the coming years due to over-capacity and changing consumer buying patterns, according to a forecast released this week.

“Much of the challenges for Hollywood are due to changing business models, fractious unions and runaway production costs,” said Jack Kyser, chief economist for the Los Angeles County Economic Development Corporation, which commissioned the study.

The authors of the study, “2006-2007 Economic Forecast & Industry Outlook,” expressed concern about the housing market, seeing a modest decline in unit sales and the median price of homes. The study also noted that office and industrial vacancy rates are dropping.

“While the overall outlook for the region in 2006 is favorable, there are several things that we will need to monitor over the year,” Kyser said.

Issues that Kyser said must be addressed included the 4.5 percent rise in the national consumer price index in Southern California; opposition to a proposed state infrastructure bond issue that could help fund projects to ease traffic congestion; rural sprawl and tight land availability in urban areas.

Kyser said that “overall, Southern California will actually see steady growth in 2006 and through 2007.

“While there has been a tendency to look for bad economic news both nationally and locally, the reality is that both are at mid-economic cycle, with a lot of upward momentum,” he said.

But the forecast highlighted a looming challenge for governmental agencies in California. It noted that a recent ruling by the Federal Government Accounting Standards Board requires governments to determine pension fund shortfalls and retiree healthcare liabilities — and find a way to pay for them.

As a result of the ruling, there is fear that some agencies could face bankruptcy, according to the LAECD.