Builders, brokers and lenders who thought they were busy during the 90s might want to hold on to the tools of their respective trades. If Fannie Mae Chairman Franklin Raines is on target, the ride might even be more exciting during the next decade.

Raines told the Mortgage Bankers Association convention in Toronto on Monday that the nation's home ownership rate could hit 71% -- or even higher -- by 2010.

"The 1990s were a terrific decade for housing," he said. "This decade could be even better."

With the rate now approaching 68%, some economists have suggested home ownership could be reaching the saturation point. Even Raines' predecessor, James Johnson, is on record as saying that when the ownership rate hits the 70% level, there will be no more renters who are either capable of buying or desirous of owning the roofs over their heads.

But Fannie Mae is now projecting 71% or more. And if that forecast is correct, some 15 million more families will purchase houses over the next 10 years. That's about 50% more than bought homes in the last decade.

"Bottom line," Raines told the MBA, "we project that consumer demand for residential investment could double in this decade, from $11 trillion today, to $21-$25 trillion by the year 2010. This would cause demand for mortgage capital also to more than double, from the current $5.4 trillion to $11-$14 trillion by 2010."

The Fannie Mae Chairman sited several "solid, analytical reasons" for the optimistic forecast:

• The nation's population will grow by up to 34 million.

• With the growth in the number of empty nesters, singles and seniors, households are becoming smaller. Consequently, the increase in population will produce an even greater growth in households.

  Fannie Mae calculates there will be 13-15 million more households created in the first decade of the 21st century, slightly more than in the last decade of the 20th Century.

• Property values will continue to grow at a "healthy rate" of between 5-6.5% annually. That's somewhat slower than the 7% recorded over the last three years, but it is on target historically, Raines said. Thus, a house worth $150,000 today could be worth more than $250,000 by 2010.

• Buyers can finance more of the purchase price then ever before, and many are. "Low downpayment lending has democratized home ownership in America," the Fannie Mae leader said.

Given these factors, Fannie Mae figures that builders will have 16 million more houses to erect, realty brokers will have 64 million more houses to sell, and lenders will have $16 trillion more in mortgages to write.

For the housing finance sector alone, demand for mortgage credit will grow at an average of 8-10% a year for the remainder of the decade, Fannie Mae is predicting. That's faster than many of the country's fastest growth industries, and it means lenders will be writing an average of $1.6 trillion in new home loans annually.

That's somewhat less than the $1.8 trillion in mortgages expected to be originated this year. But it's still 71% higher than the yearly average in the 90s, and could well result in the best decade ever for the mortgage business.

For more articles by Lew Sichelman, please press here.

Published: October 17, 2001

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