by Calculated Risk on 2/10/2005 01:07:00 PM

Two recent updates in California show the housing market may be starting to slow. I believe housing (especially New Home Sales) will be the leading indicator of a global economic slowdown.

Morgan Stanley's Stephen Roach has been using the phrase "asset economy" to describe the current situation. If housing slows down, this could take out the main pillar of the asset economy.

Home prices dipped in the OC (Orange County, CA) last month:

"Market-watcher DataQuick said Thursday that the median sales price for all residences in January was $534,000. That's off December's record high of $551,000 but still up 18.7 percent from January 2004.

Total sales last month were 2,903, down 4.9 percent from a year ago. Especially hard-hit were builders, who sold just 197 newly constructed homes -- a 24 percent drop from a year ago. It was the slowest January for builders since 1993."

And in Northern California:

"... real estate market has lost much of its steam in terms of volume. Decreasing volume is 'normal' behavior for the Santa Clara County real estate market for the end of the year. It is the degree of the decrease that remains a concern. Volume went from 154% of the 10-year average to 132% in June. Then went from 132% to 114% from mid-November to mid-December; and finally from 114% to 98% starting January 12, 2005. SCC only experienced 44% of the offers seen during the peak summer. This is a lower percentage than any of the 10-years that we have data for."