Economists See Refi Tumble in '04

Home sales are expected to remain strong over the next 18 months, but refinancings are really going to tumble next year, according to a panel of housing economists.David Seiders, chief economist of the National Association of Home Builders, said home sales will set new records this year, but he expects sales to decline by only 2.1% in 2004. Meanwhile, refis could hit a record $2.6 trillion this year, Fannie Mae chief economist David Berson told a housing forum sponsored by the Homeownership Alliance. But he expects refis will "tumble" to $850 billion in 2004. Commercial bankers are indicating that refinancings "may have peaked in May," said Paul Merski, chief economist for the Independent Community Bankers of America. The economists expect economic growth to pick up in the second half. However, they indicated that the impact on mortgage rates would be gradual, and that the 30-year fixed mortgage rate would not exceed 5.7% at the end of the year. Freddie Mac chief economist Frank Nothaft said he believes the default rate (at least 90 days past due or in foreclosure) on conventional prime mortgages will peak in the second half and come down in 2004. Mr. Berson said, "We are right at the peak."