Home Sweet Home
March 1, 2005
As home ownership in the United States now approaches 70 percent of the
population, a record by any measure, the big question remains: Can real estate’s
wild ride continue? Many industry experts, like Patrick Lawler, chief economist
with the OFHEO, predict a deceleration in home value growth in the months ahead,
especially in areas that were white-hot in 2004. “The increases just can’t hold
like they have in the past. Home price inflation has been particularly steep
when compared to the price of nonhousing goods and services,” says Lawler.
“While house prices grew 12.97 percent in the last year, other goods and
services, as measured by the Consumer Price Index, grew by only 2.68
percent.”
Low interest rates have spurred what can only be described as a
home buying frenzy in recent years, and everyone agrees they are headed up. But
just how high is a point of contention. Doug Duncan, chief economist of the
Mortgage Bankers Association, predicts the average interest rate on the
benchmark 30-year mortgage will top out at 6.3 percent, down from earlier
forecasts of 7 percent. Others, such as Michael Carney of the Real Estate
Research Center at California State Polytechnic University, Pomona, say the
30-year rate might hit 8 percent in 2005. That would seem to be a huge jump, one
that might price out many buyers and put the skids on the market. Not so, says Carney. “Demand is just so strong, I don’t see anything that would cause a
major collapse for the next five or even 10 years,” he says.
advertisement
