Housing market may be fading

Don Hogsett, January 12, 2004

Raising a caution flag and suggesting that the bull market in housing may be losing some steam, housing sales turned broadly weaker during November, with both sales of existing and new homes heading lower.

But housing starts, which tend to be a lagging indicator, taking their cue from prior-month's sales, kept chugging ahead during the month, rising by 4.5 percent, the Commerce Department reported.

Sales of existing homes, by far the largest component of the housing market, slid for a second straight month in November, slipping by 4.6 percent to a seasonally adjusted level of 6.1 million. That figure is down 290,000 units from 6.4 million in October, the National Association of Realtors reported. Resales are now down 9.3 percent from a 13-month high of 6.7 million units recorded in October.

In a corresponding dip, the historically volatile market for costly new homes slipped for a third straight month, declining by 2.4 percent to a seasonally adjusted 1.08 million units from 1.11 million units in October, the Commerce Department reported. Sales of new homes have declined 9.1 percent from a 13-month high of 1.2 million units set in August.

The only sign of life in November came from housing starts, which climbed for a third straight month, rising by 4.5 percent to a seasonally adjusted 2.1 million units, down from 2.0 million in October. Most of the November action came out of the apartment sector, where starts jumped up 6.3 percent, compared with a smaller gain of 3.3 percent in sales of single-family homes. During their 2003 run-up, new home sales have surged by 27.2 percent from a low of 1.6 million units started in April.

Still proving some support for the nation's housing market are historically low mortgage rates, with the national average commitment rate for a 30-year, conventional fixed-rate mortgage sipping slightly to 5.93 percent in November from 5.95 the preceding month, according to Freddie Mac.

For all of 2003, the average rate was about 5.8 percent, the lowest level since 1971, said David Lereah, chief economist of the national Association of Realtors.

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 -4.1% 15.7% -6.5%
Midwest -6.6 8.0 -10.1
South -5.1 -2.2 0.4
West -2.4 10.4 -1.3

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