U.S. housing market cooling – Fannie Mae CEO
REUTERS
6:38 a.m., April 14, 2003
NEW YORK – The U.S. housing market, the lone bright spot in a sluggish economy, is showing signs of cooling but is not in danger of a bust that some had feared, Fannie Mae Chief Executive Franklin Raines said Monday.
"The housing market is going to slow down. It's already slowing down. Home prices won't increase at the rate they have increased in the last two or three years," Raines said in an interview with CNBC television.
Fannie Mae, a government-sponsored enterprise and the biggest buyer of U.S. home loans, reported Monday a 60 percent increase in first-quarter earnings, fueled by Americans' huge appetite for loans to refinance mortgages or buy a home at low interest rates.
"We are going to see the natural process of gradual slowdown, which we have seen in the past. We never had a boom-bust cycle in the United States and we don't expect to see one now," Raines said.
Home sales and construction have subsided from last year's record highs, but analysts have blamed the downtick on a long harsh winter and reluctance among consumers to commit to buying a home after the U.S.-led war against Iraq began.
Weekly mortgage application volume, especially refinancing, has also slid from its record peak set in mid-March.
Raines maintained that a decline in refinancings would not hurt its bottom line.
"Refinances don't have a significant impact on us because it really is replacing one loan with another loan and so it doesn't drive our business," he said. "Although the volumes of business will go down, we don't see that it's going to have a significant impact on our profitability."
The National Association of Home Builders will release at 1 p.m. EDT (1700 GMT) Tuesday its April reading on homebuilder optimism. In March, the group's index fell to 52 points, its lowest level since November 2001.
On Wednesday, the Mortgage Bankers Association of America will report applications for the week to April 11 at 7 a.m. (1100 GMT).
At 8:30 a.m. (1230 GMT) on Wednesday, the Commerce Department will release its March data on U.S. housing starts. Analysts polled by Reuters on average forecast that home construction would have rebounded to an annualized 1.692 million units in March from February's 1.622 million units.
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