Median price, sales see drops.

By Patrice Hill, The Washington Times Knight Ridder/Tribune Business News

Mar. 1--An unexpected 9.2 percent drop in new home sales in January and a 13 percent drop in the median home price provided the latest signs that the red-hot housing market may finally be cooling, economists said.

The fall-off in sales was among homes costing more than $200,000, with the biggest losses in the Northeast, Midwest and South. Sales of more affordable homes under $200,000 grew -- resulting in a median price drop of $30,000, to just under $200,000, the Commerce Department reported yesterday.

"Housing fundamentals are as good as they get," said Richard Berner, chief U.S. economist at Morgan Stanley. He predicts both sales and home price growth will decline this year and next.

The market may have sown the seeds for its own demise when prices soared well beyond average household incomes in many locations, particularly on the East and West coasts, he said. In the Washington area, the median home price of $371,000 is more than three times the average household income.

But historically low 30-year mortgage rates averaging below 6 percent continue to nurture the market, despite a softening of demand. Like most economists, Mr. Berner said he has been humbled by the market's resilience in the face of repeated predictions of its demise. He does not expect the market to tank in any big way.

"A precipitous decline in activity is unlikely" as long as mortgage rates remain in the single digits and home buyers are earning higher incomes and getting new jobs, he said.