Preliminary housing data are pointing toward a slowdown in home sales, while construction activity remains "surprisingly" strong, according to Fannie Mae chief economist David Berson."Recent trends in production versus sales are a bit disturbing, and may suggest the excess inventories of unsold homes may have increased in early 2005 from already relatively high levels," Mr. Berson says in his weekly commentary. The Fannie economist also notes that the Mortgage Bankers Association's weekly survey of purchase mortgage applications was running 7.5% below the fourth-quarter level as of Feb. 9. "The obvious implication, if these data are indicative of actual trends, is that housing production may be exceeding demand," Mr. Berson warns. A National Association of Home Builders economist acknowledged that builders are rebuilding their inventories so that buyers don't have to wait nine months to get into a new home. But he says he does not believe production is out of line with demand.

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