“On Friday, the U.S. Commerce Department reported that sales of new homes surged 4.9% in July, compared with June. Monday, the National Association of Realtors said existing-home sales slowed last month but remained near historic highs,” writes Patrick Barta in today’s Wall Street Journal.

“A central pillar of the economy, and one that has helped offset the current business slowdown, housing has been the focus of intensifying scrutiny as other industries have sputtered. The fearful question: Will housing fall, too?”

“The answer now appears to be no. The home-sales market boasts fundamentally strong features that at least for now appear likely to help it weather a storm.”

“These features include a relatively tight supply of homes, greater-than-expected population increases that swell demand and continued low mortgage rates. Loan-assistance programs introduced in the 1990s by lenders and government agencies have effectively offset rising home prices and further boosted demand. Even Wall Street’s swoon seems to be helping indirectly, prompting some wealthier people to switch money from stocks to real estate.”

“There are some ominous signs on the housing front. In certain local markets where values skyrocketed in the late 1990s — for example, San Francisco and Silicon Valley, Manhattan, Denver and Austin, Texas — values could drop sharply, as demand generated by the now-fizzled technology boom dries up. Already, some sellers are having to cut their asking prices.”

“Sharply higher mortgage or unemployment rates could sink home sales. A broad, deep recession would drag down housing, along with the rest of the economy. But many economists doubt these dire developments will occur. While nationally the housing market is likely to cool off over the coming year, forecasters expect sales and prices to continue to grow — at a much slower pace.”