Fannie Mae Chief Executive Franklin Raines on Wednesday said he expects 2004 to be a record year for U.S. home buying, as lending rates hover just above four-decade lows.
“There’s a growing unanimity that this is going to be a terrific year for housing,” Raines told reporters at a meeting of the Business Council, an organization of chief executives. “With the reduction in the interest rates, even now half of the loans that are out there could be economically refinanced.”
The head of the largest U.S. mortgage financier made his forecast after the Commerce Department said U.S. housing starts fell 7.9 percent in January to a seasonally adjusted 1.903 million units. Analysts blamed the larger-than-expected decline from December in part on snowy winter weather.
Permits, an indicator of builder confidence, fell 2.8 percent in January to a seasonally adjusted 1.899 million units.
Still, Raines said: “The sentiment among homebuilders is quite strong, and that’s going to ripple through a lot of industries,” producing more jobs.
Housing has boomed in recent years, and Raines joined Freddie Mac, the No. 2 mortgage financier, in calling for another strong housing market for 2004.
Their outlooks reflect what has been a shift among some observers who expected the market to slow if a resurgent economy were to cause the Federal Reserve to raise short-term interest rates, ultimately pushing mortgage rates higher as well.
Fed Chairman Alan Greenspan last week told Congress the economy is poised for strong, lasting growth, but that policymakers could be patient about raising rates.
Raines said he expects $1.9 trillion in mortgage originations in 2004, down by about half from 2003. Still, he said that level is “going to be very supportive of housing prices in the year, and housing prices are a major component of consumer sentiment.”
Mortgage lenders, in contrast, will likely cut about 65,000 jobs this year as refinancing declines, the Mortgage Bankers Association said last month.
Raines also said that though housing price increases have slowed in some areas -- especially former Internet centers such as Seattle and Silicon Valley -- “we’re very sure there is not a national housing bubble ... You don’t see, anywhere, an imbalance of inventory.”