Although housing cannot sustain its current pace, not even a prolonged war with Iraq will put much of a dent in the market, the chief economist of the National Association of Realtors maintains.

At worst, a long, drawn-out war in the Middle East would have the same impact as a 150-basis-point increase in mortgage rates and still leave the housing industry in fairly good shape, David Lereah said at the 840,000-member organization's annual convention recently.

A lengthy battle will bring sales down to the 5.1 million unit a year level, Lereah offered. "That's still a pretty healthy housing environment," he noted.

On the other hand, a short-lived fight like the Gulf War conflict a decade ago would cause only a brief dip in the market, the NAR economist ventured.

"Some people" will postpone buying, "but they will come right back" once the fighting is over, he said. "A war is so anticipated that there won't be the shock factor that there was during the Gulf War."

Absent any conflict, Lereah, who was chief economist at the Mortgage Bankers Association for several years in the mid-1990s, is predicting that mortgage rates will rise next year as the economy finally begins to pick up some steam.

He is forecasting that the economy will "recover fully" by next year's third quarter, and that loan rates will rise only "modestly" to an average of 6.8 percent for the year. And as a result, he said, existing home sales should slide but only marginally to 5.27 million units.

Even at that, though, the NAR economist said 2003 will go down as the third best year ever for resales.

When they final tally is taken for 2002, NAR expects sales to total a record 5.47 million units, a 3.4 percent increase from 2001.

Lereah believes new home sales should top out at an all-time high this year, too. His forecast is for an increase of 4 percent to a record 945,000 units in 2002, then an easing to 921,000 next year but still the second-best ever.

The slight cooling should take some of the pressure off prices, at least in the existing home market, he also said.

At the same time, appreciation will slow from 6.4 percent this year to 4.2 percent next year for resales, he predicted. But new home prices should continue to accelerate at the same 4.8 percent pace.

Overall, though, the NAR economist said that while housing will remain "very healthy," it will not be contributing as much to the economy has it has the last two years.

While housing will continue to sustain the economy with an underlying base of activity, he said, business spending and increases in manufacturing and other sectors will be necessary to grow the economy.

Published: December 11, 2002

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When Lew Sichelman first started writing about housing in 1969, he was the youngest real estate writer in the country. Now, 37 years later, he's one of the oldest -- and most decorated. He has been rated the top housing columnist in the country by the National Association of Realtors as well as by his peers in the National Association of Real Estate Editors. Indeed, NAREE has recognized his work on numerous occasions. One year - due to his advancing age, he can't recall which one - he earned top honors in the annual NAREE Journalism Contest in three out of the four major writing categories. It was the first time one writer has won so many NAREE awards in a single year. Known for his ability to make even the most difficult topics understandable, Sichelman also has been honored by the National Association of Home Builders and the Mortgage Bankers Association. He began providing in-depth coverage of and consumer-oriented information about housing and housing finance at the Washington Daily News, where he was real estate editor. He held that same position for nine more years at the Washington Star, which purchased the News in 1972. The Star, a so-called "writer's newspaper" which also had the misfortune of being an evening paper, was put out of its misery in 1981, and Sichelman, who had begun self-syndicating his column in 1978, decided to become a full-time columnist. Today, his column, "The Housing Scene," is distributed by United Media to newspapers throughout the country. He also is on the staff of National Mortgage News, an independent newspaper which is considered the bible of the mortgage business. And he writes for numerous other publications, including MarketWatch.com, where he answers readers questions once a week, Sports Illustrated (don't ask), RealtyTimes.com, BigBuilder and others. Sichelman is married, the father of five and grandfather of eleven.