All the fundamentals remain in place, and the overall housing market continues to exhibit ongoing strength. Favorable mortgage rates, as well as strong household income and job growth, continue to bolster housing demand.

The hurricanes did cause some dramatic problems short-term, and there are some lingering ones.

The home-ownership rate has edged down a bit from its high in early 2004, and we're seeing more people moving into rental housing.

The housing market is seeking out a peak. While it is still too early to conclude that it has found one, there is growing evidence that the Fed has started to hit its mark and housing will begin losing some of its exuberance in the period ahead.

The key reason the market is losing momentum is a major decline in housing affordability measures as prices continue to move up aggressively in many, many markets around the country. There are reasons for the builders to be doing things to bolster demand, hold buyers in and limit cancellations, and I think that's what's going on out there.

I do have this sort of weakening of the housing sector, but I think it should be thought of as a systematic cooling down process toward sustainable levels of activity and not viewed as kind of a classic housing downswing that's part of an economic cycle leading to a recession.

I basically have a wait-and-see attitude with some healthy suspicion about this report. Either there is something that all of those other reports are not telling us, or this will get revised.

I am worried about the potential for a trailing down process that gains some momentum.

I'm calling 2006 a simmering-down process. It's been one heck of a run.

It's really unprecedented, so you wonder if it can continue.