Housing drop-off strikes in January

Don Hogsett, March 10, 2003

Showing signs of finally slowing down after a long, heady run-up, U.S. housing sales started to cool off in January, as war jitters and a spotty economy combined to offset persistently low interest rates and put a chill on home buying.

Reversing the solid gains racked up in December, sales of new homes dropped off at a double-digit pace, falling by 15.1 percent; and housing starts were virtually flat, edging up just 0.2 percent. The only segment still making headway was sales of existing homes, by far the largest piece of the housing market, where sales still grew, just at a slower pace, rising by 3.0 percent after a 5.2 percent increase the prior month.

The slowdown was not entirely unexpected, and analysts and housing industry spokespeople have for months been suggesting that sales in 2003, while remaining historically strong thanks to low mortgage rates, were likely to cool off somewhat.

Moreover, that same group is starting to caution, February housing sales could come in at the low end of expectations, with severe winter storms across much of the nation putting a damper on activity. "About a fifth of the country was essentially shut down for the better part of a week in February due to the huge snowstorm in the East, so we shouldn't be surprised to see a negative impact on home sales," said Cathy Whatley, president of the National Association of Realtors. But, she was quick to add, "the disruption will only postpone transactions, and we should see strong housing activity throughout the year."

Housing by region
Month-to-month % change

Existing home sales Housing starts New home sales
Source: U.S. Department of Commerce and the National Association of Realtors.
Northeast 4.5% -16.7% 43.5%
Midwest -7.5 -11.9 -42.2
South 7.3 3.8 -12.9
West 5.1 9.9 -1.4

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