Reply #28: The boom goes on

[54anickel]

http://cbs.marketwatch.com/news/story.asp?guid=%7BD6D4F7BE-8E43-4590-9A8F-CA1A00A46C36%7D&siteid=google&dist=google

Following up on a first half of the year in which "anything that smacked of homeownership has done extremely well," the housing market should continue its four-year record run right through the end of the year, said David Seiders, chief economist of the National Association of Home Builders.

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"The fundamentals are good. The reason interest rates are slightly higher is that we are in a growing economy rather than dealing with inflationary pressures," he added. "This is good news, because corporate profits are up 40 percent from two years ago, so companies are spending and jobs are being created. In the housing markets, this is largely neutralizing the effects of modestly higher interest rates."

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In general, the markets where prices have risen substantially reflect areas where demand has far outpaced supply and are not indicative of a price "bubble," the economists said. But a handful of markets, where prices have soared and job growth has remained stagnant, may be due for a correction, they agreed.

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Credit quality

Despite concerns that consumers are overleveraged on housing, Paul Merski, chief economist for the Independent Community Bankers of America, said the balance sheets for homeowners are strong.

"Credit quality continues to improve," he added.

The NAR's Lereah pointed out that while incomes have not necessarily kept pace with home prices, the percentage of income that homeowners devote to mortgage payments is actually near a historic low, at about 17 percent. In the 1980s, the figure was closer to 30 percent.

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If there is trouble in the making, it could be in the form of the number of interest-only mortgages that are being underwritten today, according to Frank Nothaft, chief economist for mortgage agency Freddie Mac. (FRE: news, chart, profile)

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