Contrary to Some Experts' Predictions, MBA Sees Continued Strength In Housing Market in 2004

WASHINGTON – The Mortgage Bankers Association has joined a growing chorus of observers who expect the housing market, coming off the best year in two and a half decades, to remain robust in 2004. Earlier this year the U.S. Department of Commerce and the National Association of Home Builders, who had both been conservative about the housing outlook for 2004, indicated they may have been too cautious. Then the MBA added its voice at a news conference outlining the organization’s economic projections and legislative priorities. Doug Duncan, MBA senior economist and executive vice president for research and business development, indicated 2004 promises to be “an exceptionally strong year.” Key points of the latest MBA forecast included: * Although existing home sales will fall by 5.1% in 2004 and by 3.6% in 2005, sales will remain at very high levels by historical standards. They will remain unchanged in 2006. * New-home sales will fall by 7.2% in 2004 and 3.3% in 2005, also remaining unchanged in 2006. * Mortgage originations will be down from a record high in 2003, but will still hit $1.99 trillion in 2004, $1.72 trillion in 2005 and $1.78 in 2006. “We see interest rates increasing only moderately due to continued expectation of low inflation,” Duncan said. “Long-term rates should increase from current levels by 40 to 50 basis points by the end of 2004, and another 70 to 80 basis points during 2005. Coming off our recent lows, these are very modest interest rate increases for the level of economic growth we are expecting.” He also noted the expanding role of the secondary market. “The secondary market continues to grow in importance as U.S. housing is funded by domestic and now global capital markets. Within domestic markets, the share of loans our members originate and the secondary markets subsequently purchase has grown dramatically,” Duncan said. “Furthermore, a growing share of U.S.-denominated mortgage debt is being held overseas, approaching 15 percent and growing at a rate of 30 percent. Changes in rates in global capital markets quickly flow to consumers.” Looking at the macroeconomic future, Duncan said he expects economic growth to be strong through 2006 with GDP up, employment accelerating and inflation modest. Consumers will continue to make purchases as they benefit from lower taxation and lower monthly mortgage payments. Home price appreciation will slow, but remain positive as housing prices reflect market fundamentals, he added. The MBA also unveiled its legislative priorities for 2004. They include: * A national standard to combat predatory lending practices. * Legislation to ensure regulatory oversight of government-sponsored enterprises in the secondary market. * Adequate terrorism insurance for commercial and multifamily real estate. * Strengthening FHA by eliminating overly burdensome processes and restrictions and giving the agency more latitude to invest in new technology, create new products and retain staff. * Removing restrictions to investment in real estate through Real Estate Mortgage Investment Conduits. * Simplifying mortgages, including further public comments on the pending Real Estate Settlement Procedures Act. * Clarifying that loan officers and similar personnel are exempt from overtime regulations. * A voice for the mortgage industry in the new Fair and Accurate Credit Transactions Act. * Ensuring the economic substance of mortgage banking companies’ loan-hedging activities are accurately conveyed to readers of their financial statements. Kurt Pfotenhauer, MBA senior vp/governmental affairs, and Robert Couch MBA chairman, called special attention to the issue of predatory lending. “It’s clearly one of the most important issues for our members,” Couch stated. “It’s critical to our members because what we’re seeing sweeping across this country are states, counties and cities all trying to come up with their own creative ways of approaching abusive lending practices they perceive are out there. “That patchwork has risks. Our goal is try and come up with a way to strike a balance, a balance between protecting the consumer and making sure we don’t cut off credit to deserving consumers.” -