- The Washington Times - Thursday, December 16, 1999

U.S. home sales in 1999 will register record annual growth, and then slow next year, Fannie Mae said.
The top U.S. mortgage financier said sales of previously owned and new homes will rise 4.3 percent this year to 6.11 million homes from last year’s record 5.86 million units. Next year, though, sales will drop 7.5 percent to 5.65 million units.
“We don’t think we are going to get a fifth consecutive record year,” though the expected 1999 increase is revised up from Fannie Mae’s earlier estimate of a rise in sales this year, said David Berson, chief economist at Fannie Mae.
The slowdown will come as the overall economy loses momentum next year. “That, coupled with higher mortgage rates, should bring home sales down modestly,” Mr. Berson said.
Home resales will rise to 5.20 million units in 1999, then fall to 4.80 million in 2000, Fannie Mae said. New home sales will reach an annual rate of 916,000 units this year and 845,000 in 2000.
District-based Fannie Mae said the nation’s gross domestic product would increase 3.9 percent in 1999 and 3.4 percent for 2000. That’s down from 1998’s growth of 4.3 percent. “If we get a slowing next year, it will come in the second half of the year,” Mr. Berson said. There’s “a lot of momentum in the economy now” heading into the new millennium.
Mr. Berson also said continued growth is fueling fears of inflation, and Federal Reserve policy-makers will respond by raising the overnight bank lending rate during the first quarter of 2000.
The Fed’s policy-setting panel the Federal Open Market Committee raised the overnight bank lending rate to 5.50 percent from 5.25 percent during the last meeting Nov. 16. The next meeting will be next Tuesday.
Interest rates have risen in recent weeks as bond investors’ concerns heightened that the Fed would once again boost rates. The 30-year fixed-mortgage rate will likely average 7.42 percent this year, up from last year’s average rate of 6.94 percent, Fannie Mae said.
The jump in mortgage rates will further reduce the number of people refinancing their homes with the refinancing share falling from 39.9 percent in 1999 to 22.1 percent in 2000. In 1998, the refinancing market share was 50.8 percent.
Fannie Mae also estimated that mortgage lenders will originate $1.33 trillion of loans overall this year, down from $1.45 trillion in 1998. Next year, lenders will originate $993 billion of loans.
Fannie Mae buys mortgages from lenders, repackages them, and sells them as securities. Although it is a government-sponsored enterprise set up to finance housing, the company is owned by stockholders.

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