The good times can't last forever for mortgage bankers, economists say.

This year the seemingly unstoppable housing market has outpaced experts' expectations, despite an unstable stock market, financial turmoil overseas, and a domestic political scandal. And low interest rates have brought a surge of mortgage refinancings, driving total mortgage originations toward a record $1.4 trillion.

But plunging foreign economies will finally take a toll in 1999, leading to lower consumer spending and confidence, said Lyle Gramley, consulting economist for the Mortgage Bankers Association of America.

Mr. Gramley, speaking at the association's annual conference here on Wednesday, also said a labor shortage would slow the domestic economy. "The housing market is not immune," Mr. Gramley said.

This year sales of existing homes are expected to set a record at 4.75 million, homeownership has reached an all-time high of two-thirds of all households, and profit margins in the mortgage industry are strong.

To date, overseas problems have been a "blessing in disguise" for domestic housing markets, bringing down interest rates, according to the association's chief economist, David Lereah. But next year the story will be different.

Low interest rates will play a "tug of war" with a slowing economy, Mr. Lereah said, and "the economy will win," dampening consumers' appetite for homebuying.

In 1999 total home sales will fall about 8%, Mr. Lereah said, while mortgage originations will fall 17%. Housing starts will drop 5%, and the refinancing share will dip to 44% of all originations, down from 50%.

Losses overseas are already prompting domestic banks to tighten domestic commercial lending standards, Mr. Gramley said. About 20% of large and midsize banks have pulled in the reins, he said. Nonbank mortgage companies have been hit particularly hard.

Nonetheless, Mr. Gramley said he does not expect the credit crunch of the early 1990s to repeat itself. Banks have more high-quality assets now, he said, and post better returns on assets and equity. Banks are not limiting construction lending, which they did earlier in the decade, he noted.

Mr. Lereah stressed that though the housing market will contract, it is shrinking from very high levels.

Some observers even say that the U.S. housing market will not be affected by global credit shortages.

"Fluctuating markets, currency swings, and interest rate drops have drained liquidity from other markets in the U.S.," said James A. Johnson, chief executive officer of Fannie Mae, speaking at the conference. "But American homebuyers will continue to have uninterrupted access to credit markets that sovereign governments and global institutions will find it hard, if not impossible, to tap."

The National Association of Realtors is also predicting a slowdown in the domestic economy but a robust housing market next year. Its forecast for existing home sales is 4.39 million, second only to this year's expected record of 4.75 million.

"With the turmoil on Wall Street, people see safe property as an investment," said Fred Flick, vice president of economic research for the realty association.

Mr. Flick expects interest rates in 1999 to continue to drift downward. Thirty-year fixed rates will be about 6.1% by the end of 1999, he said.

The Federal Reserve will cut interest rates at least once more, Mr. Gramley predicts. "The Fed has a lot of room to maneuver," he said. "If they have to, they will push the federal funds rate below 3%." The last time the Federal funds rate was that low was 1993.

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