|Housing markets show signs of bust: Fannie
By Robert Schroeder, MarketWatch
Last Update: 4:12 PM ET June 24, 2005
WASHINGTON (MarketWatch) -- The possibility of a housing bust has
"risen sharply in certain parts" of the U.S., thanks to a number of
conditions including easier lending standards, a Fannie Mae executive
In a presentation prepared for a National Association of Home Builders
meeting May 5, Fannie Mae's (FNM: news, chart, profile) Thomas Lawler
said housing-market conditions in many areas mirror past conditions
that preceded regional housing busts. Lawler is senior vice president
for risk policy at the housing-finance giant.
Fannie Mae did not release a copy of Lawler's presentation to the
public when it was given. The Wall Street Journal first reported on
the 34-slide presentation. The data Lawler presented include material
collected by the Federal Housing Finance Board, the Office of Federal
Housing Enterprise Oversight and Lehman Brothers, in addition to
The report noted that no one can tell if a housing bubble exists until
after the fact.
Lawler said a number of lending patterns over the past year are
similar to those seen in the late 1980s, the "boom" of the most recent
"boom/bust" cycle. Among those patterns are increased buying by
investors, "unrealistically high consumer expectations" that home
prices will rise, "creative, riskier financing" for homes and a higher
share of adjustable-rate mortgages.
Fannie's top economist said that he sees home prices moderating and
that there is a chance home sales will decline in some parts of the
country in 2006, particularly the Midwest, where some cities have
experienced weak job growth. See related story.
Economist David Berson said sales of new homes so far this year are
nearly 7% higher than a year ago.
In his spring and summer mortgage and economic outlook, Berson noted
total existing-home sales jumped 4.5% to 7.18 million units in April,
a record for both single-family homes and condominiums. The gain is
more than 5% above year-ago levels.
Robert Schroeder is a reporter for MarketWatch in Washington.