Hot housing market might be cooling
By Thomas A. Fogarty, USA TODAY
War, weather and a weak economy have taken a toll on the nation's housing market.
"The boom is over," says Celia Chen, housing economist at Economy.com. Other analysts stop short of that, ascribing recent slowness in the market to fleeting factors, including a brutal winter for much of the country, and a temporary national paralysis from the war in Iraq.
Key national indicators of March sales won't be issued until Friday, but plenty of preliminary evidence suggests the soaring housing market has hit a rough patch.
Market tracker DataQuick reported Tuesday that March sales in the San Francisco Bay Area were down 15% from a year ago. A day earlier, DataQuick reported a 7.5% sales decline for March in the hot Southern California market, the first year-over-year decline since August.
Local market trackers have reported an 18% decline in Denver sales, and a 5% decline in Richmond, Va., sales for March. Sales in Massachusetts were off 15% for the January-March quarter. Monthly sales in Minneapolis were flat compared with March 2002, and sales in Houston increased just barely. Denver and Minneapolis recorded double-digit increases in homes listed for sale.
MGIC, a Milwaukee-based mortgage insurer, reported Tuesday that the nation's housing market cooled in the January-March quarter. Its Market Trend index was down just 1% from the previous quarter, but MGIC analyst Neil Siegel says many markets are softening, and home price growth is slowing as the nation struggles with its "meager recovery."
Chen of Economy.com says factors that have driven the housing market ever higher have — or soon will — play themselves out. No longer is stock market money flowing into housing. And mortgage interest rates, which Chen calls the "prime force" driving the market, will increase as the economy improves, she says. "Housing is going to slow for the next year or two," she says.
But DataQuick analyst John Karevoll says nothing in the California data suggests a permanent downturn there. Prices continue to rise, and Californians aren't stretching their personal finances as they did before the last housing bust in the early 1990s.
As for the March drop in sales volume, Karevoll says, "People were watching more CNN than going to open houses."
On Friday, the Commerce Department and the National Association of Realtors are scheduled to report separately on March sales of new and existing homes. Housing economists are looking for a 1.5% decline in the March figure for sales of existing homes, according to a consensus estimate by Thomson IFR. New home sales should increase from February, which registered the slowest sales rate since August 2000.
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