In a sign that the red-hot housing market may cool down significantly this year, the National Association of Home Builders' housing market index declined Tuesday for the third month in a row.

The index, based on a survey of 400 home builders, settled back to 69 in March on a scale of zero to 100, from 73 in February and 76 in January. The survey accounts for home sales, projected sales for the next six months, and traffic of prospective customers.

"There are very few builders who are saying things are not good, but we're all expecting a big slowdown by summer," said Michael Carliner, the association's economist. "Overall, we are predicting that the year will be 3% below 1998" in housing starts.

Mr. Carliner said that the last six months of this year could be up to 10% slower than the second half of 1998.

The association attributed the decline in its index to rising mortgage rates. The average interest rate on 30-year fixed-rate mortgages rose for the sixth consecutive week last Thursday, to 7.11%, according to Freddie Mac.

The index has closely tracked the mortgage rate, Mr. Carliner noted. The mortgage rate was at a 31-year low of 6.49% in early October. In November and December the housing index reached a 20-year high of 78.

Charles Ruma, the association's president and a home builder from Columbus, Ohio, said the interest rate's rise above 7% played a role in builders' reduced expectations.

Mr. Ruma added that despite the reduction in demand, the market is still hot. Indeed, he said, home builders continue to express concerns over shortages of skilled labor and finished lots.

Another indicator released Tuesday suggests that the market may be slipping-but less than home builders might fear. The Commerce Department said housing construction dipped 0.6% in February, with a 1.1% rise in single-family construction offset by a 6.3% drop in construction of apartments. But the department said the annual rate of housing construction barely changed. It stood at 1.80 million units, off January's 12-year high of 1.81 million.

Mr. Carliner said that the biggest market softening occurred in two regions. A slowdown in employment cut into building in the Southeast, and construction has been off in the Pacific Northwest, which depends heavily on exports to Asia, Mr. Carliner said.

The builders group said the single-family sales component of its index declined 4 points in the latest survey, to 75. Six-month sales expectations also declined 4 points, to 75, while traffic of prospective buyers fell 3 points, to 52.

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