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No comments needed. Excellent summary of the current housing market.

If the U.S. housing market is not a bubble bursting, it is at least a boom deflating, as new data made clear today.

New home sales sank 10.5% last month, the Commerce Department said, the biggest decline since April 1997 and far bigger than economists expected. The seasonally adjusted annualized rate of home sales was the slowest in nearly two years. Sales have fallen in four of the past six months. Meanwhile, the number of unsold homes on the market rose more than 4%, representing a 6.3-month supply, the highest in more than a decade. Unsurprisingly for anyone with a vague knowledge of basic economic principles, rising supply and falling demand means new-home prices are falling. The median price for a new home fell for the fourth straight month to $230,400, nearly 3% lower than a year ago. It was the first time prices have fallen on a year-over-year basis since December 2003.

New-home sales make up less than 14% of the total housing market; pre-owned homes make up the rest, and they rose solidly last month. But new-home sales are typically a leading indicator of housing trends, while used-home sales are lagging. And last month's strength in used-home sales was likely the aftereffect of January's temporarily warm weather and lower mortgage rates.

Some observers worry that rising mortgage rates will hurt the housing market; they certainly won't help. The Federal Reserve is almost certain to raise short-term borrowing costs next week and could raise at least once more by May. That has no direct impact on 30-year mortgage rates, but could possibly make adjustable-rate and more exotic flavors of mortgage more expensive.

But one reason housing is slowing down already, even with borrowing rates still relatively low, is that many houses have simply become unaffordable to many buyers. A strong economy and job market will keep some buyers in the game, but a slowdown in housing is likely to hurt the economy. The only question at this point, it seems, is whether the housing slowdown will be gentle or screeching. Most economists are in the gentle camp, but a few are not. One of those self-described "uber-bears" on housing, Ian Shepherdson of High Frequency Economics, called today's report "awful, but not yet a convincing collapse." Comforting.