Housing starts nationwide took a surprising jump in September after falling for two consecutive months, according to government numbers released yesterday, but housing economists and analysts said there is evidence that the market in the Washington area and other hot spots is softening.
"The Washington market peaked about six months ago, and in the past 60 to 90 days, it has been measurably weakening," Mark M. Zandi, chief economist at research firm Economy.com, said in an interview after speaking at the National Association of Home Builders' fall construction forecast conference in Washington.
Zandi said the Washington area was "one of the first markets that peaked because it was so active before." He said the area has been "the most-juiced up market" in the Northeast corridor and one of about 75 markets nationwide in which housing is overvalued.
He based his conclusion on anecdotal evidence. Northern Virginia is seeing "more of the weakness," he said, because it has seen the biggest bulge in building in the area.
Zandi, who has long warned of a downturn, told the builders that "my view is that the [national] housing market is peaking and the first thing to go is home sales. . . . The next thing that will weaken is housing price growth." He predicted that prices would "essentially go flat in 2007."
Other analysts at the conference agreed that the market nationally and locally appears to be softening but emphasized that the slippage is following several years of record sales. And several, including Zandi, acknowledged that they have been predicting a turn toward a more normal pace for months, only to be proved wrong.
"We all agree that there is something unsustainable going on out there" in the hot markets, said David Seiders, NAHB's chief economist. But "the overall outlook for housing is very good. There is certainly no disaster pending here."
The Ryland Group Inc.'s chief executive, R. Chad Dreier, said yesterday in a conference call on quarterly earnings that Washington sales "leveled off around July." But, he said, "although we have not been able to increase prices and margins since then, we have been able to maintain the high margins we already have."
David A. Wyss, chief economist for Standard and Poor's, said in an interview at the builders' conference, "Clearly Washington is seeing sales dry up quicker than the rest of the country . . . but I don't see the area weakening that much, with the federal government" as a big, consistent employer.
The builders group revised its national housing forecast to add about 30,000 new units this year for post-hurricane rebuilding.
Seiders said housing-start and permits data released yesterday by the Commerce Department "fooled me once again."
Despite expectations that starts would fall, they rose 3.4 percent for September to a seasonally adjusted annual rate of 2.1 million units, after upward revisions to the July and August rates. The September pace was 10.3 percent above a year ago and remained above 2 million units for the sixth month in a row.
Builders sought permits at a rate of 2.19 million units, up 2.4 percent from August.