Housing and residential financing industries should march steadily along into the record books for 2003, leading economists said.
In a conference call presented by the Homeownership Alliance Wednesday, five industry experts agreed that the residential housing sector of the economy would continue its robust activity for the second half of 2002.
Paul Merski, chief economist for the Independent Community Bankers of America, noted the explosive activity in the mortgage industry, adding that there are "very few signs of that slowing in the months ahead."
He noted two "key factors" he believes to be driving the boom. "I think we've seen a fundamental shift in consumer's portfolio thinking. Consumers really want to hold real assets in their portfolio...We've also seen multiple refinancing as a routine activity for many households over the last two years....with rates being as low as they are now," he said.
He predicted $3.2 trillion in mortgage loans for 2003.
The analysts discussed different market conditions that indicate the economy is in a sluggish recovery. There was general agreement that the Federal Reserve Board would keep the federal funds rate steady for the next year or so.
David Seiders, chief economist for the National Association of Home Builders, pointed out that the high level of cash-out refinances and home equity loans has kept the economy afloat.
He also said that the low federal funds rate, coupled with the tax cuts, would push the economy forward during the second half of 2003.
David Berson, Fannie Mae's chief economist, agreed that the market was poising itself for growth and a sustained low federal funds rate.
Indicating that an economic recovery is already in progress, Freddie Mac's chief economist Frank Nothaft discussed his analysis of delinquencies and foreclosures and their relationship to economic upturn. He said that historically, the lag time between the onset of recovery and the peak of deliquencies is 12-18 months.
Nothaft said he believes that deliquencies, which are hitting their highest levels in the last four years, will continue to rise in the near term, peaking in the next six-12 months, then falling off.
As for long-term interest rates, the economists foresee a gradual rise toward the end of 2003, with the general consensus putting the 30-year rate under six percent at the end of 2003.