...But Housing Could Become Achilles Heel

Like Pogo, the erstwhile cartoon alligator who once said, "I have met the enemy and he is us," the housing business is worried that its Achilles heel could prove to be its own success.

David Seiders, chief economist of the National Association of Home Builders, thinks the probability of such an outcome "is quite low." Indeed, he said at the NAHB's annual convention here last week that the cooling off process is progressing in an orderly fashion.

But he's nervous enough to warn that a "quick reversal" could be in the offing if speculators decide to dump their holdings, or if rates on the so-called exotic mortgages that have helped fuel the housing sector suddenly shoot up.

"If you are looking for a trigger, that would be it," Mr. Seiders told Mortgage Servicing News. "If there is a sudden unloading by speculators, or if interest rates go up by more than a few points, it could spark a real reversal."

The real wild card is that no one knows for sure how many houses were snapped up over the last few years by investors looking for quick capital gains. Some estimates suggest that as many as four out of every 10 purchases were by investors, some of whom Mr. Seiders believes are depending solely on appreciation to float their boats and not even renting their units.

Other events also could incite a downward spiral, the NAHB economist admitted. For example, foreign investors could "all of a sudden" dump their investments in Treasury securities.

Mr. Seiders and other economists don't see that as even slightly imminent. But they are keenly worried that housing, which has made unprecedented positive contributions to economic growth over the last few years, could become its downfall.

"Many people who look at risk now consider housing to be the biggest risk, not just to itself but to the entire system," he told MSN.

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