MBA Sees Normalizing Market

The mortgage market is normalizing, Mortgage Bankers Association chief economist Doug Duncan says, adding that some markets will see declining home prices but that appreciation will average 6% to 7% nationwide.He told a media briefing at the group's National Secondary Market Conference in Chicago that the indicators show "an orderly slowing of the housing market" for 2006. Originations will decline from a revised $2.9 trillion for 2005 to $2.4 trillion this year, while refinancings will be down 30%, with less rate-sensitive cash-out refis making up an 80% share, Mr. Duncan predicted. The MBA is also forecasting that the Federal Reserve will stop raising the federal funds rate once it reaches 5%. The Fed is sensitive, Mr. Duncan said, to the fact that that this housing boom has been different from previous ones, with more borrowers holding products with adjustable terms and therefore more households subject to interest rate fluctuations. However, he cautioned that the Fed could go even 25 basis points higher than the forecast, and some economists have said the Fed could go to 6%. The MBA can be found on the Web at http://www.mortgagebankers.org.