Fannie: Home Price Rise to Settle Near 3.5%

Fannie Mae economists say they expect house price appreciation to drop from 10% in 2004 to 3.5% this year and remain within a range of 3.0%-3.5% for the next couple of years."Eventually, worsening affordability conditions and higher mortgage rates will slow housing demand -- especially for investors," said Fannie Mae chief economist David Berson and senior economist Orawin Velz. The Fannie economists say they believe record home sales in 2004 were "fueled in part" by investor purchases. For 2005, they are forecasting a 22% decline in originations to $2.19 trillion. However, Fannie Mae economists project that the adjustable-rate mortgage share of the loan market will decline slowly from about 38% in 2004 to 28%-30% by the end of 2005.