Housing Market Cools Off

The five-year housing boom is over, judging from growing statistical evidence and the performance of some leading builders. The slowdown is already rippling through the economy.

In the last week, the Commerce Department reported that January sales of new single-family homes fell 5 percent - the fourth decline in seven months - and the backlog of unsold new homes hit a record. The National Association of Realtors said used-home sales slipped 2.8 percent in January, the fourth straight drop and 5 percent below January 2005.

Upscale Toll Brothers Inc. said signed contracts in the November-January period fell 21 percent from a year ago, and KB Home reported more buyers backing out of contracts.

Still, the prospect of a housing slowdown appears less frightening than it did a few months ago, according to those who track the industry. There seems to be little fear of a collapse in sales and prices.

Explanations for the cooling-off vary. Many people bought homes during the past five years and are staying put. Some analysts blame a decline in consumer confidence. And interest rates have been rising, especially for adjustable mortgages that allowed people to buy more expensive homes than they could have afforded with a 30-year loan.

Dallas builder Mike Mishler, president of the local builders association, says Texas markets are holding up because they are affordable - the median price in Dallas is $145,000 compared to the national average of $213,000. But even in Dallas, the inventory of unsold homes rose to a record in the fourth quarter.