ABA: Rising Rates May Slow Housing Recovery

Rising long-term interest rates could slow the recovery in the housing market, according to bank economists, who already expect to see rising subprime mortgage foreclosures over the next six months.The nine members of the American Bankers Association Economic Advisory Committee project that home sales will flatten out in the third quarter and gradually improve next year. However, "residential home price declines could deepen, especially if mortgage rates continue to climb," said Scott Brown, chief economist for Raymond James & Associates. Eight of the AEC economists say they expect consumer credit quality to deteriorate over the next six months, and five committee members expect the tightening in subprime lending to continue. "There is broad agreement among committee members that we will see an increase in foreclosures and an increase in delinquencies rates, especially in the subprime area," Mr. Brown said. The ABA can be found on the Web at http://www.aba.com.