Housing Sales Coming in for a Soft Landing

Washington — The air continued to leak out of the housing bubble during December, further contracting what had been in recent years a red-hot real estate market and positioning it for a relatively soft landing and more sustainable levels of growth.

Two key components of the housing market, existing home sales and housing starts, both stalled out in December, posting declines. Meanwhile new home sales, while still growing, sent out mixed signals, still growing in the Midwest and the West, but sputtering in the Northeast and the South.

Sales of mostly moderately-priced existing homes, which account for the lion's share of the U.S. housing market, fell by 5.7%, to a seasonally adjusted level of 6.6 million units, the National Association of Realtors (NAR) reported. Sales of existing homes are now down 10.2% from a 13-month high of 7.4 million units recorded last June.

David Lereah, NAR chief economist, said, “This is part of the market adjustment we've been discussing, with a soft landing in sight for the housing sector. The level of home sales activity is now at a sustainable level, and is likely to pick up a bit in the months ahead.”

The most forward looking segment of the market, housing starts, tumbled by 8.9% to a level of 1.93 million units, due entirely to a big slide in starts of single-family homes, while starts of multi-family units actually increased. Single-family starts skidded down by 12.3%, while multi-family starts rose by slightly more than ten%, the U.S. Commerce Department reported.

Sales of generally more pricey new homes rose by 2.9%, but volume was mixed across the nation. Sales jumped up by 22.7% in Midwestern states -- but slumped by 23.3% in the Northeast. A gain of 11.1% in the West was partially offset by a dip of 2.6% in the South.