Freddie Mac's Deputy Chief Economist Amy Crews Cutts told ACUMA attendees that economists crying doom over prospects in the mortgage industry will certainly be wrong. "The question is, how wrong?"
"We are all projecting lower numbers for next year," she allowed, noting that Marc Zandi of Economy.com and other prominently publicized economists have been gloomy about real estate for a long time. "I happen to think that the foot has come off the accelerator, rather than the brakes are screeching," she said.
Economic growth will continue to be strong throughout 2006 at 3.6%, while unemployment will stay below 5%, she said. Energy prices can throw a monkey wrench into the works, but if they stabilize (as they have been for weeks now) inflation will be checked. The "lag effect" from the Fed's boosting interest rates won't be fully felt for up to 18-months, she advised, and mortgage origination will decline (15% to 18% lower than the high-flying 2005, but still above that of 2001).
Refis will decline and exotics and ARM will continue to lose allure. But strong housing growth remains on the West Coast and Mid and South Atlantic Coastal Areas.
