While stock portfolios continue to take a pounding, rising home values are taking the sting out of the loss.

The NASDAQ has dipped below the psychological bottom of 2000, and the Dow is hovering uncertainly above 10000, yet housing sales remain strong, prompting Federal Reserve Chairman Alan Greenspan to comment before the Senate Housing Committee,"`The housing sector ... has been a very important contributor to the American economy."

Housing gains have created what Greenspan called "a very substantial buffer of unrealized capital gains."

And the good times in housing look set to continue. While consumer confidence is buoyed by easing unemployment figures and recession fears, the real hero in the economy recovery may be continued low mortgage interest rates.

The Mortgage Bankers Association forecasts low mortgage rates for some time to come. The 30-year contract rate is projected to remain about 7.1% in the second half of this year, increasing slightly to 7.3% in 2002. The 1-year adjustable mortgage rate is forecast to remain low at 5.7%, says the association. Home purchase originations are expected to remain strong at $882 billion for 2001, while a 25 percent drop in refinance activity is expected to yield only $271 billion.

Home sales were strong in the first half of the year, at annual rate of 6.2 million units, and are expected to ease a little in the second half to an annual rate of about 5.9 million units. Existing home sales, which represent 85% of total sales, are forecast to be 5.15 million units this year, and new home sales are expected to be 903,000 units, says the association.

MBA's first mortgage finance forecast for 2002 projects housing starts to increase slightly to 1.65 million units, and home sales to decrease slightly to 5.0 million units for existing homes and 862,000 units for new homes.

Despite a strong showing by housing, the economy may not yet be out of the woods. Greenspan left room for another possible short-term rate cut by the Federal Reserve with the remark,"`The period of sub-par economic performance, however, is not yet over, and we are not free of the risk that economic weakness will be greater than currently anticipated, and require further policy response.''