US housing economists see steady gains over decade

WASHINGTON (Reuters) - Economists said Wednesday they see a decade of steady house price rises and homeownership expansion in the United States, but warned that restraints on mortgage finance enterprises could imperil those gains.

Economists representing government-sponsored mortgage finance enterprises Fannie Mae and Freddie Mac, builders, real estate agents and independent community bankers forecast annual home price appreciation averaging 5 percent over the next 10 years.

Immigration, population growth, tight inventory and building constraints will fuel demand over the 10-year period 2004-2013, even as bargain interest rates rise, said the economists -- David Berson of Fannie Mae, David Lereah of the National Association of Realtors, Paul Merski of the Independent Community Bankers of America, Frank Nothaft of Freddie Mac, and David Seiders of the National Association of Homebuilders. They presented their findings in a report released by the Homeownership Alliance.

Despite a recent run-up in home prices propelled by a period of low mortgage interest rates, the economists do not expect a housing bubble collapse or even substantial reversals in regional markets.

"The likelihood of a decline in home prices at the national level is quite remote. Even at a local level, demand-supply conditions today are such that there are few, if any, markets that exhibit bubble characteristics," they said.

The report was issued on the same day other reports showed a double-digit decline in new home sales in April and the third week in a row of declines in mortgage applications. Economists noted the 11.8 percent sales drop came after a record high level recorded in March, but said higher mortgage rates will inevitably lead to a cooling of the market, which set a record for sales in 2003.

The economists' report said mortgage debt outstanding would grow 8.25 percent a year over the next 10 years and U.S. homeownership rate would top 70 percent from its current level of around 68 percent.

But they said the housing market could be dampened by restrictions on government-sponsored mortgage enterprises, which include Fannie Mae and Freddie Mac.

"Certain proposed changes in the regulation of government-sponsored enterprises could impair their ability to fulfill their secondary market role," the economists said.

Momentum grew in Congress to toughen oversight of the GSEs after accounting problems last year at Freddie Mac and Fannie Mae. Federal Reserve Chairman Alan Greenspan and Bush administration officials have warned the size of Fannie Mae and Freddie Mac could be a risk to the financial system if they are allowed to grow unchecked.

But a proposal to create a new regulator for the housing GSEs bogged down over differences over how far the government should distance itself from the enterprises.

 

 

 

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