Americans have been straining to hear the sound of the housing bubble bursting for many months, and according to the media on Monday, they might not have heard a pop but there was definitely a ssssst.

A number of news reports flatly stated that the bubble had burst and the general and conventional wisdom seemed to be that the unprecedented growth in real estate sales and prices are over. This is all based on the release of the Commerce Department's Census Bureau and the Department of Housing and Urban Development's joint monthly report on new home residential real estate sales for January 2006.



In spite of record high temperatures throughout the country, the kind of weather that usually gets the Spring Market hormones humming, word was out that real estate had a pretty awful month.

Relatively speaking of course.

As is always the case with this bubble thing, there are a lot of ways of looking at the figures. For starters, the Commerce/HUD report is only concerned with new home sales which can provide a pretty squishy (highly technical economic term) bunch of data. Homes sometimes sell before a permit is pulled, sometimes halfway through construction, or may stay on the market long after completion. An actual sale can show up in a monthly survey at almost any point in a home's construction so that a high number of sales in December may well include homes that went under contract in September to close before year end, and houses that were being custom-built for an owner and closed immediately to free up bank financing. Likewise, a large inventory in January can reflect spec homes that have barely emerged from the ground after permits were pulled in November. In fact, of the 536,000 houses for sale at the end of January, 107,000 were reported as not yet started and 312,000 as being under construction. Only 118,000 completed homes were languishing on the market. These figures were only slightly different than the December figures with the greatest increase (10,000 homes) being in the under construction category. There were only 2,000 more completed homes for sale at the end of January than at the end of December.

So, here is the information from Commerce/HUD for January. Draw your own conclusions.

Sales of new one-family houses in January were at a seasonally adjusted annual rate of 1,233,000. This was a decrease of 5 percent from the revised December rate of 1,298,000. A five percent downturn is certainly significant, but in January, 2006, new home sales were still running 3.3 percent above sales in January 2005.

And prices certainly are not suffering. The median price of new houses sold last month was $238,100 and the average was $291,600. The corresponding figures for December 2005 were $229.000 and $281,700. One year ago the median price was $223,100 and the average was $283,000.

At the end of January there were an estimated 528,000 new houses in inventory. This represents a supply of 5.2 months at the current sales rate. At the end of December there were 515,000 homes for sale, an inventory of 4.8 months and in January of last year 437,000 homes were available, a 4.4 months supply. It is worth noting, however, that other recent studies have reported record housing starts for the month of January which, as we suggested above, may account for the rise in inventory almost as much as slowing sales.

On a regional basis, the figures may be a little more disturbing for some. Sales in every region except the West dropped by double digits from December to January. The Northeast was down 14.9 percent, the Midwest 10.8 percent, and the South 10.3 percent. The West was totally responsible for shoring up the stats with sales up 11.3 percent since the December 2005 figures.

January 2005 to January 2006 figures also showed a strong regional variation. The Northeast was down 6.6 percent and the South 2.3 percent while the West again showed significant growth of 13.3 percent. The Midwest also increased 7.0 percent from the same month last year.

One month does not a market indicate, especially with figures as scattered as in this report. It is much too early, particularly with the population increasing and mortgages remaining at low levels, to start holding a wake for the extraordinary housing market we have enjoyed for the last seven or eight years. Perhaps four or five months of declining sales of both new and existing houses; perhaps a sudden spike in interest rates; perhaps other unwelcome economic news will give a clear indication that this heady trip is over. On the other hand, February's figures could spin us around again.

This may not be the best time to jump in to invest in real estate but when it comes to buying a home timing the real estate market doesn't work any better than trying to time the stock market. There is a lot of room down the road to regret that you opted to wait out the housing bubble while rates continued to rise and prices didn't take the tumble that everyone seems to expect.