Housing Market Cools Down

Don Hogsett, Staff Staff, April 9, 2007

The broad U.S. housing market continued along a skittish, erratic course during February, with sales of existing homes and housing starts showing signs of stabilizing, but the market for costly new homes unexpectedly losing ground.

In a solid shot of good news, sales of existing homes, which account for almost three-fourths of the nation's housing activity, improved for a third straight month, rising by 3.9% to a seasonally adjusted level of 6.7 million units. After bottoming out last fall, sales have risen by 7.4% from a 13-month low of 6.2 million units last September, the National Association of Realtors reported. But even with the recent rise, re-sales are still off 5.5% from a recent high of 7.1 million units recorded in 2005 before the housing bubble started to leak.

Providing a strong incentive to shoppers, the national median home price fell 1.3% in February to $212,800, with mortgage rates remaining low.

"Some of the rise in home sales may be from mild weather that brought out shoppers in December, but fundamentals have improved in the housing market and buyers see a window now with historically low mortgage interest rates and competitive pricing by sellers," said David Lereah, chief economist of the National Association of Realtors.

After falling by more than 14% in January, housing starts staged something of a recovery, rebounding 9.0% to a seasonally adjusted level of 1.5 million units from 1.4 million in January. But all that could change again in March if builders develop cold feet after an unexpected slide in new home sales during February. Sales of costly new homes, a volatile market subject to wide monthly swings, fell by 3.9%, to a seasonally adjusted level of 848,000 units, short-circuiting widespread forecasts for an increase after following a 16% plunge in January.

By far the hardest hit segment of the market, new home sales have now skidded down by 24.4% from a 13-month high of 1.1 million units last May.

Housing by Region
Month-To-Month % Change, February 2007

Source: U.S. Department of Commerce and National Association of Realtors
Northeast 14.2% -29.7% -26.8%
Midwest 3.9 -14.4 -20.0
South 1.6 18.0 -7.0
West 0.0 26.4 24.6

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