I met today with Pamela Holding, portfolio manager of Putnam Investments' International Growth and Income Fund (PNGAX). She has been keeping watch on the U.K. and Australian housing markets to get a sense of what might unfold in the U.S. when the boom cools.

Both England and Australia are in a sense a few steps ahead of the U.S. housing markets in that they both started to raise interest rates well ahead of the U.S. and are now finished, she says. She has been encouraged that, although both markets have cooled, neither had shown a marked drop-off in activity.

However, she got a start this morning when she heard a report that English home builder Bovis Homes Group PLC had warned that weakness in the U.K. housing market was hurting its results.

The company's July 14 release contained these statements:

"Consumers are showing caution, contributing to property transactions in England and Wales in the first quarter of 2005 being 24% lower than the corresponding period in 2004."

It goes on:

"Looking forward to the second half of 2005, there remains considerable uncertainty over the robustness of the UK housing market."

And near the end notes:

"New housing represents a credible choice for house purchasers with low maintenance, well specified properties; however, it is a challenge for housebuilders to sell into a marketplace where purchasers are lacking in confidence."

Holding says the news gave her a bit of a start this morning. "We could be at an inflection point," she says, where signs of serious weakness in the U.K. market will start to become more apparent. This clearly bears watching.

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