"The Federal Reserve will undoubtedly raise interest rates further," said Lawrence Yun, a senior economist at the National Association of Realtors. "In the next six months to a year, we see mortgage rates close to 7 percent and at that point, the home-buying activity will ease a bit."
Some economists, however, continue to say they believe the market has already turned.
The resale market "held up a little better in June than anticipated," senior economist Drew Matus of Lehman Brothers said Monday, "but the party is ending."
Yesterday, Matus said June's slight drop in new-home sales "was not the decline we were expecting. It was a surprisingly robust number given the huge number we saw in May."
But, he said, "I still think we're seeing the last holdouts who wanted to buy homes moving into the housing market. Over time, we'll see mortgage rates increase. That will lead to a decline in housing affordability, and that decline will crimp overall housing activity."
Matus cited as evidence a report last week from the Commerce Department of a steep drop in June housing starts and building permits. Starts dropped 8.5 percent from May to the lowest level in just over a year. Permits, which reflect builder confidence in future sales, fell 8.2 percent, the biggest monthly decline since 1994.
After hearing those numbers last week, Matus predicted: "This is, I think, the long-awaited start of the slowdown in the housing market."
Federal Reserve Chairman Alan Greenspan said in congressional testimony last week that June's unexpected drop in housing starts and permits wasn't "a cause for concern." Greenspan, who described the nation's economy as going through a "soft patch," said construction activity would rebound.
Frank E. Nothaft, chief economist for Freddie Mac, noted that he still expects records this year for new-home sales, existing-home sales and construction starts because of the strong first five months. But he and others have predicted a return to more normal sales numbers later in the year.
"Before we say the housing boom is over, I prefer to see two or three months of housing data all pointing in the same direction," Nothaft said. "We haven't seen that yet."
Locally, said George Mason University regional economist Stephen S. Fuller: "The party's definitely not over, not with 82,000 new jobs so far this year."
He said that "there is enormous pent-up demand here" that will take years to meet.
If the market does slow, he said, "I don't think our builders will notice because they're so busy."
