Housing market cools, builders show uncertainty

By Staff -- Home Textiles Today, 5/25/2006 12:45:00 PM

Washington -- The U.S. housing market continued its long-anticipated cooling off during April as sales of existing homes and housing starts both headed south for a second straight month.

Bucking the trend, at least for now, sales of costly new homes continued to climb, rising by 4.9%, following an even bigger jump of 12.0% in March. But even with the recent run-up, new home sales were still well beneath their torrid pace of a year ago, down 9.5% from March 2005. And while still gaining, new home sales represent the smallest component of housing activity, just 12% of activity in the housing sector.

And while sales of new homes are still going strong, builders seem to betting that it won't last for long -- housing starts fell for a third straight month, diving by 7.4% in April. Indeed, with builders growing antsy about tying up their cash, and forced to offer incentives to get a deal done, starts have tumbled by 18.4% in just three months, since January.

Commenting on the outlook, David Lereah, chief economist for the National Association of Realtors, said, "Our leading indicator for pending home sales was trending lower, and our forecast model is showing a modest decline for the second quarter, with sales leveling out before rising in the fourth quarter."