Housing market has tough month

Don Hogsett, March 15, 2004

Raising some concern that the nation's vibrant housing market, a major driver of the U.S. economy, may be a bubble waiting to burst, all three gauges of housing activity tumbled in January.

Existing home sales, by far the largest slice of the housing pie, fell by 5.2 percent to a seasonally adjusted level of 6 million units, its lowest level since last June, the National Association of Realtors reported.

Suggesting that home builders are growing a little more queasy, housing starts, a forward-looking indicator, fell even further, dropping by 7.9 percent, to a seasonal level of 1.9 million units, the Commerce Department said.

Highly volatile new home sales, a market subject to wide monthly swings, slipped by 1.9 percent, erasing all of the prior month's 1.3 percent increase.

David Lereah, chief economist of the National Association of Realtors, cautioned against reading too much into one month's numbers.

"We have to keep in mind that the level of home-sales activity over the last six months has been the strongest on record. The January pace was the sixth-highest ever and is above the total forecast for this year. We can expect month-to-month ups and downs, but the long-term trend is for home sales to stay close to record territory this year.

"Given the high level of sales in January, it's hard to read much into a monthly decline. However, unusually bad weather in much of the country may have postponed home sales."

Housing by region
Month-to-month % change

Existing home sales Housing starts New home sales
Source: U.S. Commerce Department and National Association of Realtors.
Northeast -12.5% -10.1% -5.0%
Midwest -13.2 0.0 5.6
South 2.0 -5.9 -2.1
West -5.7 4.1 -3.9

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