National - Home Sale and Interest Rate Predictions

The following were reported in a recent story by Martin Crutsinger - Associated Press: Full story . . . January 2006 : For the past few years, home prices have been surging at double-digit rates, gains that analysts said will likely slow now that sales are softening and inventories of unsold-homes are rising.Ian Shepherdson, chief U.S. economist at High Frequency Economics, predicted "real downward pressure on prices over the next few months." Seiders predicted that home price gains, which were running around 12 percent last year, will slow to about 6 percent this year. Some economists are worried that with the inventory of unsold homes rising, there could be significant downward pressure on home prices, triggering a chain-reaction similar to the bursting of the stock market bubble in 2000, a development that contributed to the 2001 recession. But new Federal Reserve Chairman Ben Bernanke told Congress earlier this month that for now he was looking for a moderate slowdown in the housing industry, not a crash. Mortgage rates have been rising gradually with the 30-year mortgage now at 6.26 percent, according to the latest Freddie Mac survey. Many analysts believe 30-year mortgages will rise to between 6.5 percent to 7 percent by the end of this year. They think that increase will be enough to trim sales of both new and existing homes and slow the double-digit gains in prices seen in recent years. The National Association of Realtors reported earlier this month that a record 72 metropolitan areas saw double-digit gains in home prices in the final three months of 2005 compared with price levels at the end of 2004.