WASHINGTON -- The slowdown in the nation's long housing boom, which has been anticipated for at least two years, seems to have finally arrived.
Sales of new homes came in at the slowest pace in a year in January, and the backlog of unsold homes rose to a 9-year high, the Commerce Department reported yesterday.
Making those developments even more dramatic was the fact that they occurred during an exceptionally mild January -- the warmest in more than 100 years.
''The weather in January was as good as it gets, yet demand fell," said Joel Naroff, chief economist at Naroff Economic Advisors. ''The decline in new home sales in January makes it clear that there is some real softening."
The Commerce Department reported that sales of new single-family homes dropped by 5 percent to a seasonally adjusted annual rate of 1.233 million units last month.
That was the slowest pace since January 2005.
On Wall Street, tumbling oil prices helped lift investors' spirits. The Dow Jones industrial average rose 35.70 points to close at 11,097.55.
The 5 percent sales decline was bigger than expected, dashing hopes that the mild January would help bolster demand. The warm weather had boosted of construction starts last month 14.5 percent, the fastest rate in three decades.
But the new report showed that with sales lagging, the increase in building activity left 528,000 new homes still for sale at the end of the month, a nine-year high.
That represented an increase of 20.8 percent from a year ago and raised the prospect that a glut of unsold homes around the country could start driving down prices.
That didn't occur in January, however. Even with the softening in sales, prices were up with the median price climbing to $238,100, up 4 percent from December.
For the past few years, home prices have been surging at double-digit rates, gains that analysts said will likely slow now that sales are softening and inventories of homes are rising.
Some economists are worried that with the inventory of unsold homes rising, there could be significant downward pressure on home prices, triggering a chain-reaction similar to the bursting of the stock market bubble in 2000, a development that contributed to the 2001 recession.