downturn next year, according to a Mortgage Bankers Association forecast detailed at the trade group's annual conference last week.

David A. Lereah, chief economist for the MBA, said the slide from the third quarter of this year through yearend 2000 -- will be caused by a rise in interest rates, not by a recession.

He estimated double-digit contraction in all major components of the housing market:

Home sales will drop 15.4% as 30-year mortgage rates hover around 8%.

Refinancings will plummet 85.1%.

Employment in the mortgage industry, which reached a 10-year peak of 375,000 in June, will fall 20%; 75,000 people will lose their jobs.

Single-family mortgage originations will decline to $940 billion, from $1.3 trillion this year and 1998's record $1.5 trillion.

Total originations will plunge 47.8%.

Purchase originations are expected to drop 13.2%, but the decrease will be closer to 20% for mortgage bankers because the volume of adjustable-rate loans, a specialty of banks and thrifts, has risen sharply thanks to higher interest rates, Mr. Lereah said. The adjustable-rate share of conventional purchase loans is expected to be 32% at yearend 2000, up from 23% in 1999.

The MBA's weekly loan-application survey, also released at the conference, found the rates for 30-year fixed-rate mortgages holding steady at the previous week's 7.86%. Application volume fell, though, by 7.1%.

Lenders will find "less demand for their products and will have to downsize to compete effectively," Mr. Lereah said. Excess capacity may lead to price wars, he said.

Rapid consolidation among the top 25 lenders is expected to continue. The top 25 currently control about 56% of the origination and 51% of the servicing business. Their share is expected to grow to 91% in both those areas by 2009, the MBA said. Lenders focused on high-loan-to-value and subprime lending may not experience as much of a downturn as lenders in general provided the economy remains healthy, Mr. Lereah said.

Lyle E. Gramley, consulting economist for the MBA, said that though the economy overall is strong, there are several potential threats to expansion: rising inflation; the possibility of a 30% to 40% drop in the stock market, which would reduce consumer spending; and an increase in the flow of dollars overseas.

Mr. Lereah observed that a Wall Street slump could have a big impact on housing. "Households are dependent on the stock market right now for buying big-ticket items" like cars and homes, he said.

The MBA also predicted that Orlando, Atlanta, and Raleigh, N.C., would be the hottest mortgage markets next year.

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