Industry specialists predict that growth in the housing and mortgage industries will slow in 1999 but remain at healthy levels.
The National Association of Realtors forecasts that growth in gross domestic product, which was at a 3.9% rate in the third quarter, will drop in the fourth quarter to 2.5% and fall substantially next year.
The United States is likely to "buy more abroad, especially in Asia, because it is cheaper and they will be eager to sell to us," said Fred Flick, the association's vice president of economic research. "This will keep pressure on American manufacturers to keep their products cheap, which will keep inflation low, which will keep rates low."
The Mortgage Bankers Association is predicting GDP growth of 1.9% in 1999, and chief economist David Lereah agreed that international factors would contribute to the decrease.
"The world is in economic crisis, which will hit the U.S.-there is no avoiding the inevitable," Mr. Lereah said. "Company profits and the manufacturing sector are beginning to contract in this country, while employment numbers are slowing. And consumers will slow their spending next year as well."
Mr. Flick said increased trade with Asia would widen the nation's trade deficit in 1999, spurring interest rate cuts and keeping mortgage rates low.
"The Federal Reserve will probably cut rates one more time early in the year - that will set up the spring," Mr. Flick said.
The Realtors group predicted that existing-home sales next year will total 4.47 million units, down from about 4.78 million this year. New-home sales are expected to reach a record 872,000 units this year and dip to 821,units in 1999.
Housing starts will reach 1.6 million units by yearend, up 8% from 1997, according to the association. However, Mr. Flick said, supply is outpacing demand slightly because home starts exceed the development of new households by a few thousand.Mr. Lereah said the decline in housing demand, coupled with decreasing interest rates, should result in a 4% to 5% contraction in the housing market.
"There were 1.59 million housing starts in 1998, and we are expecting 1.51 million in 1999 because the economy is slowing down and builders cannot build as many homes-the demand just will not be there," Mr. Lereah said.
He said the MBA expects mortgage originations this year to total $1.43 trillion and predicts $1.28 trillion for 1999. The Realtors group attributed October's 2% rise in its housing affordability index largely to low mortgage rates.
Though many people remain priced out of the market, the association said, affordability will broaden next year.
"We're going to see an increase in median home prices by about 5% next year, but the interest rates could possibly be lower than 6%," Mr. Flick said. "People's disposable income will go up around 2%, which is right in line with inflation."
Mr. Flick said a perception of job risk and concern about year-2000 issues may arise next fall but whether the country is heading for a recession will probably not be evident until the end of the year.
"We have got to be concerned about how much longer this thing will roll," Mr. Flick said. But, he added, the perception of risk "won't affect the first of the year or the home-buying season."
