Yesterday, April 15, 2004, was the unofficial last day of the national housing market boom.

The full effects of this week’s turning point won’t be felt until the home-buying season comes to a close in August. And maybe April 15 wasn’t the exact date on which the turn occurred. But put a black X on your calendar anyway because it will prove close enough.

Economic factors reported this week strongly suggest the economy has begun to make a solid comeback. Employment has picked up. Retail sales and overall consumer spending remain strong. And a small, but significant surge in price inflation must have caught the Federal Reserve’s attention.

Those data add up to trouble for the housing boom because several years of economic weakness and nearly nonexistent inflation have kept interest rates low enough to pump an unprecendented amount of cheap financing into the housing sector. But renewed economic strength will trigger higher interest rates and that will take the froth out of the housing market. A few soft spots are already in evidence around the country.

Take an Inman News poll on the housing boom.

Greenspan and Co. will try to postpone the rate hike until September or even until after the Presidential election. The rationale for delay is encompassed in a new buzzword, “slack,” which means the warmer economy still can absorb existing unused production capacity and unemployed labor without a harmful level of price inflation even absent higher interest rates. But make no mistake: the stronger economy will make higher rates a necessity later this year.

The economic data have already triggered higher interest rates on home loans. The average interest rate this week on the 30-year fixed-rate mortgage was 5.89 percent, just a tad below the 6 percent mark. The Mortgage Bankers Association predicted that average will hit 6 percent before year-end, then climb to slightly more than 7 percent by the end of 2006. Now there’s a chilling number indeed. It may be two year away, but remember it’s an average, not the top.

The fact that more buyers now choose an adjustable-rate mortgage to finance their home purchase suggests they have stretched themselves to the very end of their home-purchasing power. More jobs and better pay should help them bear the burden of bigger mortgage payments, but only to an uncertain and finite extent.

MLSs that are nearly empty of for-sale homes inventory combined with high demand for housing still fuels very rapid sales and multiple over-list-price offers from buyers. But even a slight perception among homeowners that a housing downturn could be afoot could trigger a sell-off that would increase inventories at the very time when buyers have become exhausted by skyrocketing home prices.

The nation now has a record 1 million Realtors who would like nothing better–as we also would–than to see the housing boom continue. But get ready, guys. The party’s almost over.

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