- The Washington Times - Tuesday, November 29, 2005

The housing boom has peaked, the National Association of Realtors said yesterday.

October sales of existing homes fell 2.7 percent to a seasonally adjusted annual rate of 7.09 million, a decline that would have been worse without increased demand from displaced hurricane victims, according to the trade association’s report.

“What we’re saying is that the housing boom has peaked,” said Lucien Salvant, a spokesman for the association. “Things appear to be cooling off, and we expect them to continue cooling off.”

The decline had been expected because of higher mortgage rates and a glut of nearly 2.9 million existing homes for sale last month — the highest inventory in 19 years and enough for a 4.9-month supply at the current sales pace, Mr. Salvant said.

Economists predicted the buildup of unsold homes would help dampen the surge in home prices that saw 69 cities report double-digit gains in prices this summer compared with the third quarter of 2004.

In Washington, the median sales price of an existing single-family home jumped 30.8 percent to $437,000 in the third quarter from $334,000 in the third quarter of 2004, according to research firm DataQuick.

The drop in existing-home sales is the latest indicator that the housing market is cooling. Earlier this month, declines also were reported in the construction of new homes and applications for new building permits. Major homebuilders, also, have been warning of slower sales.

Still, the number of existing homes sold last month was 3.7 percent higher than the more-than-6.8 million units sold in October 2004. And the median, or midpoint, price of an existing home sold last month rose by 16.6 percent to $218,000, compared with October 2004 — the fastest pace in almost 26 years.

“The good news is we’re coming off the peak in a fairly measured or unchaotic way,” said Nicholas Buss, senior vice president at PNC Bank in Pittsburgh. “There’s been no major downturns. It’s slow and steady, and we expect it to stay that way.”

Mr. Buss said sales, despite the slowdown, were at more than 7 million at an annual rate “and we used to get excited at 6 million.”

The statistics indicate a “gradual slowing in housing,” according to a research report issued yesterday by Merrill Lynch economist David Rosenberg.

In his report, Mr. Rosenberg noted that while median prices rose nearly 17 percent year-over-year, actual sales prices have been in that range for the past five months.

The average 30-year mortgage interest rate was 6.28 percent last week, down from 6.37 percent the week before, the first decline in 13 weeks, according to McLean mortgage giant Freddie Mac.

Nicolas P. Retsinas, director of Harvard University’s Joint Center for Housing Studies, said the decline in existing-home sales could be explained by two main factors: higher mortgage rates and home prices more closely aligning with buyers’ income levels.

“On the two coasts where [home prices and income levels] have been out of line for a long time, that had to be reconciled,” Mr. Retsinas said. “We’ve seen the prospects of a soft landing for some time … the debate now is will it be a soft landing or a precipitous fall?”

Patrick Newport, an economist with Global Insight, a forecasting firm in Lexington, Mass., said he expected rates, which are up by about a half-point in the past 10 weeks, to rise by another half-point in the next six months as the Federal Reserve keeps boosting short-term interest rates.

“These increases will cool off the housing market and deflate many local housing bubbles without creating a housing crash,” he said.

While fewer home sales and “much slower price appreciation” can be expected in the future, 2005 will be a record year for the residential housing market, Mr. Retsinas said.

A steady economy should keep home sale prices high, “but if jobs were lost, [the market] would be more vulnerable to price corrections,” he said.

Regionally, existing-home sales declined 7.4 percent in the Northeast, 1.2 percent in the West, 1.8 percent in the South, and 1.9 percent in the Midwest.

• This article is based in part on wire service reports.

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