Monday, March 07, 2005

Housing boom may be cooling off

'Pending sales' gauge falls 2.1%

By MICHELE DERUS

A new national index of pending home sales suggests the resale market is descending from its record-breaking 2004 peak.

The monthly index, which debuted Monday, measures signed sales contracts for existing homes - a good indicator of market performance in the weeks ahead, according to David Lereah, chief economist for the National Association of Realtors in Washington, D.C.

That trade group already reports closed sales on a monthly basis.

Based on January sales, the index suggests February and March will be "historically high (but) trending off of peak levels recorded in 2004," Lereah said.

That peak was probably in November 2004, association closed-sales figures show. The annual sales pace was 6.98 million in November, 6.81 million in December and 6.80 million in January.

The index reading was 120.6 - 2.1% below December but 8.6% above January 2004. A reading of 100 is equal to U.S. housing resale volume during 2001, the first of four consecutive record years for existing-home sales.

The index is the latest sign that the boom is losing steam.

Most housing economists expect sales to dip slightly this year as mortgage interest rates climb slowly in a strengthening economy. Mortgage rates, near 40-year lows in 2003 and 2004, have ticked up in recent weeks, with the benchmark 30-year rate now approaching 6%.

U.S. new-home sales dipped in January - to an annualized 1,106,000 from 1,218,000 in December and 1,155,000 in January 2004, by the U.S. Commerce Department's count.

In metro Milwaukee, January's housing performance was mixed. There were 1,043 existing-home sales in Milwaukee, Waukesha, Washington and Ozaukee counties, surpassing the 930 a year earlier, Metro Multiple Listing Service figures show.

But only 176 new-home permits were issued, down from 192 a year earlier, according to MTD Marketing Services LLC.

February housing sales numbers for metro Milwaukee, among the nation's earliest reporting areas, are due late this week.

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