The National Association of Home Builders now expects the Federal Reserve Board to start tightening short-term interest rates by the end of summer.Chief economist David Seiders originally forecast the Fed would wait until after the November elections to raise the Federal Funds Rate, however improvements in job growth and higher core inflation are now likely to provoke some tightening in August, nearly 90 days before the Presidential election, Mr. Seiders said at the NAHB's Spring Forecast Conference in Washington. Mortgage Bankers Association chief economist is watching the inflation numbers carefully, but he told Mortgage Wire he is not yet ready to change his interest rate forecast. Fannie Mae's chief economist, David Berson, said his forecast, which calls for two and possibly three "tightenings" by the Fed this year, already accounts for a modest rise in inflation. "We're hoping that if inflation comes back with any sort of vengeance, the Fed will cut it off at the knees," Mr. Berson told MW. Mr. Seiders now thinks the central bank will take the federal funds rate to 1.5% by year's end. "The economic recovery process has now evolved from a jobless affair to a full-fledged expansion," he said. The NAHB economist's forecast for long-term fixed-rate mortgages is now 6.2% by the end of this year and 7% by the end of 2005. While the initial impact of higher rates could be positive in the short-term if buyers who were taking a wait-and-see stance decide to take the plunge before rates go any higher, he added, higher rates are "bound to exert some drag on (housing) demand over time."
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Out of the 221 metro areas tracked, 205 had existing home price increases and just 15 reported year-over-year declines, the National Association of Realtors said.
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