Though a slowdown in housing production is expected later this year, the housing market is likely to remain strong for the next decade, according to a Harvard University study due out today.

The report by Harvard's Joint Center for Housing predicts that high interest rates and home prices may make housing less affordable, but only over the short term.

The report predicts that over the next decade household growth may increase slightly, and housing production will continue at 1990s rates in terms of the number of units built and the value of construction. But it also says that without a drop in interest rates or a boost in income growth, housing production is likely to experience a brief downturn in 2000.

Interest rates, which have risen by more than a percentage point in the past year, are making it more difficult for some homeowners to take out mortgages.

Surging prices also may cut into affordability, the report says. It notes that the value of owners' equity in their primary residences grew 20% from the beginning of 1995 to the end of 1998, to $7.8 trillion, and that growth in home prices has outpaced overall inflation for the last six years. Prices rose 11.1% from 1994 through 1999, almost matching the 11.9% rise from 1985 through 1989. Prices hit record highs in 15 of the country's 39 largest metropolitan areas in 1999.

Average after-tax payments for a typical home with a 10% down payment and a 30-year fixed-rate loan rose 4.5% in 1999, and down payment costs rose 3.5%.

However, according to the report, strong income growth has offset rising costs. Homeowner income rose more than 12% from 1994 through 1999, thanks in part to a strong stock market. After-tax mortgage payments as a share of income fell .7 of a percentage point over the same period, to 17.6%.

Also, despite the rise in interest rates, home sales rose 248,000 in 1999, and the value of residential construction rose.

Adjustable-rate mortgages have helped to offset the impact of climbing interest rates. In 1999 the market share of adjustable loans rose nine percentage points, to 21%. Because there is still room for growth in their market share, the adjustable loans should help keep housing markets from taking a severe plunge this year, the report says.

Declining housing production in more than a third of the states in 1999 was offset by gains in other states. Four states - Florida, California, Georgia, and North Carolina - accounted for 40% of all home building in the United States last year.

One indication the housing market is still going strong is that May home resales outperformed analysts' expectations. Resales surged 4.3% to an annual rate of 5.09 million units last month, after falling 6.2% to an annual rate of 4.88 million in April, the National Association of Realtors said Monday. Analysts had predicted a drop of 1%, to a 4.83 million annual rate.

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