A more than seasonal pull-back in new construction suggests that housing is slowing down. That raises an interesting question. Is the building industry simply protecting profits by carefully controlling inventory or is it anticipating slower sales?

Realty Times' focus this week is on the home building industry where recent reports have people talking about housing once again. This time, economists and pundits are worried that a housing slowdown has already begun. Here are several progressive indicators:

• In September, the price of new homes fell nearly 6 percent.

• New construction of homes fell nearly 6 percent by October.

• Mid-November reports say that building permits dropped nearly 7 percent.

• Last week, mortgage interest rates have hit 2-year highs and are now over 6 1/2 percent.

With less new inventory on the market, it appears that housing is fulfilling the prophecy that pundits have been expecting -- that years of record sales can't continue.

But consider this -- housing starts are still over 2 million for the year, even if they've dropped from a pace of nearly 2 and a half million from September. While that's the biggest drop in six years, it's still an orderly cooling down period, says David Seiders, chief economist for the National Association of Homebuilders. He suggests that prices are creating their own kind of drag on the market, including those for lumber, concrete and other building materials which have jumped since Hurricanes Katrina and Rita.

New records can't be set again and again without a rest period, and it could be that housing won't get a chance to rest for long before being called back into the game.

Leading economic indicators for October such as a drop in jobless claims and rise in factory hours suggest that the economy is already improving, and that new starts in housing are sure to follow. But there is one caveat -- those building costs. Construction costs have skyrocketed 30 percent, as the continuing housing boom has created shortages of some materials. Rebuilding 632,000 homes in and around New Orleans has pushed lumber prices up as much as 50 percent. The price of oil has also impacted costs, even though oil prices are drifting back down recently.

Realty Times advises that homeowners who want to buy a home now should not be discouraged. A pull-back in prices and increased availability of inventory is happening now, but housing could rebound as early as January, so if you're going to sit on the sidelines, don't plan to warm the bench for long. We believe that spring housing could rebound to test new record levels in 2006.

Published: November 23, 2005

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Blanche is a renowned author of five real estate books. Her newest, Bubbles, Booms and Busts: Make Money In Any Real Estate Market, McGraw-Hill, was rave-reviewed by The New York Times. She was also selected from hundreds of real estate experts to contribute to Donald Trump's book, Trump: The Best Real Estate Advice I Ever Received: 100 Top Experts Share Their Strategies, Rutledge Hill Press, and is featured on page 68. Order Now Review - Honors In 2006, Blanche was selected among scores of candidates to author two consumer real estate guidebooks for the National Association of Realtors: The NAR Guide to Home Buying, and The NAR Guide to Home Selling, Wiley & Sons. She is currently planning two new books for the NAR and its members.       Known for her keen insight into real estate industry issues and for her ability to make complex subjects easy to understand, Blanche is a sought-after keynote and continuing education speaker. Real estate organizations from MLSs, to brokerages, to franchisors, to associations hire her to provide up-to-the-minute analysis of real estate industry news and advice on how to improve revenues. Her passionate delivery, peppered with stinging wit, is a huge hit with audiences and fans. Don Klein, CEO Greater Nashville Association of Realtors, Blanche Evans, Richard Courtney, president 2007, GRAR "The GNAR membership meeting last week featured Blanche Evans as the keynote speaker. Her comments and insights resonated extremely well with those in attendance and we have had many requests for copies of her PowerPoint Presentation. She was a terrific part of the membership meeting and convention program!" - Don Klein, CEO Greater Nashville Association of Realtors Coverage from WSMV, Nashville - 8-14-2007 That Interview Guy - Get Inside The Head Of Today's Generation 2007 AE Institute Session - To purchase 2006 AE Institute Session - Parts 1 2 3 4 5 6 7 8 9 HouseValues Mastermind call - Parts 1 2 Blanche's fireside chat with Jeremy Conaway, HAR - Click here. For more articles by Blanche, click here.