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Appreciation Expected to Slow Down

Expect single-family mortgage origination to decline by 10% to 20% in 2005, according to two secondary market economists as refinancing and the home sales market cool off. Fannie Mae chief economist David Berson sees originations falling from $2.74 trillion in 2004 to $2.15 trillion this year.

His pessimistic forecast is based on home sales declining by 7%-8% and house price appreciation slowing to 3.5%. His cross-town rival at Freddie Mac expects 2005 loan production will decline by only 10% to $2.42 trillion.

Freddie chief economist Frank Nothaft expects home sales will slow by 4%-6% from 2004's record pace. And the increase in house prices will slow to 5%-7%. "That would be the slowest in six years," he told reporters during a press briefing sponsored by the National Association of Home Builders.

House prices rose 10.5% in 2004 and the two economists do not believe this is sustainable. Mr. Berson said the decline in affordability and record home sales over the past two years will slow homebuying in 2005.

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