Housing Market Should Continue to Thrive Through 2006, Bankers Believe

Amarillo Globe News

Oct. 31--A national mortgage group anticipates a robust housing market for the next two years, predicated on low interest rates and continued economic expansion.

In fact, the Mortgage Bankers Association expects mortgage loan originations to hover around 2004 levels. The group also expects interest rates to ease up to 6.5 percent by the end of 2005 and 6.8 percent by the end of 2006.

"We are forecasting only a modest increase in rates despite the continued expansion of the economy. As long as rates remain at these levels, home buying will remain an attractive alternative to renting and the purchase market will continue strong," said Douglas Duncan, MBA's chief economist.

Freddie Mac Mortgage Corp. reported Thursday that 30-year fixed-rate notes averaged 5.69 percent for the week ending Oct. 21, off 5.74 percent from the week before.

Freddie Mac reported 5.68 percent for the southwest region. This year, the mortgage rate high of 6.34 percent on 30-year loans was recorded the week of May 13.

Gary Meador is branch manager of Extraco Mortgage.

"We do expect a rise in interest rates, just because the economy is probably going to pick up after the elections," Meador said.

"The Federal Reserve will continue to monitor inflation. Amarillo's economy is still growing. Housing is still affordable. New-home building is still robust. Therefore we see the mortgage and the home-buying activity to remain strong for 2005," he said.

According to figures from Coldwell Banker First Equity, Realtors, year-to-date home sales through the Amarillo Board of Realtors are up 7.22 percent over last year. Average prices are up nearly 6 percent year-to-date, while market time remains the same.

Randy Jeffers of Coldwell Banker expects mortgage rates to remain below 7 percent in 2005.

"We are testing last year's lows right now. I don't see anything to change the interest rate outlook drastically next year," he said.

"As far as home sales are concerned, we are creating jobs, and between jobs and low interest, that fuels the market. Again, fortunately, we have a reasonable inventory of properties for sale and we are not seeing out-of-control price acceleration. When you have those three ingredients, you've got the makings of a very good market for 2005," Jeffers said.

MBA anticipates economic growth at rates below 2004 rates, but strong enough to support home purchases.

"GDP (Gross Domestic Product) growth will likely decline from an expected growth rate of 4.4 percent during 2004 to 3.5 percent in 2005 and 3.4 percent in 2006," Duncan said.

The economy should generate some 400,000 new jobs per quarter over the next two years, which is a key factor in fueling the market, he said.

Amarillo's commercial environment economy pulsed up one more time in October, according to Amarillo National Bank's economic analysis.

Retail sales show a 7 percent year-to-date increase over 2003; more people -- about 1,900 -- are working; and building permits are up 22 percent over last year.

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