Fannie Sees Record Home Sales

Fannie Mae chief economist David Berson is forecasting record home sales this year, with house prices rising at an annual rate of 10%, down from 12% in 2004."We now project an increase of nearly 4% in total homes to an all-time high of 8.29 million units (comprised of 7.03 million existing units, including sales of condominiums and co-ops, and 1.27 million new units)," Mr. Berson says in his August commentary on the mortgage market. "This assumes that there will be a small fall off in activity later this year, presumably as investor activity begins to cool and as mortgage rates continue to edge up." But so far, there are no signs of a slowdown, he admits. And even with the Federal Reserve pushing up short-term rates, Fannie's chief economist says he expects the interest rate on the 30-year fixed-rate mortgage to be 5.83% at year-end and only 5.88% at the end of 2006. Nevertheless, he is forecasting a 9% drop in total home sales next year to 7.57 million units and a slowdown in price increases. "House price gains should slow to the 3%-4% range, although there is a risk of a larger slowdown given the increased use of riskier mortgage products in recent years and the sharp jump in investor buying -- especially in certain metro areas." Fannie Mae can be found online at http://www.fanniemae.com.