If there are upward pressures on interest rates this year, they probably won't come from the Federal Reserve Board, a panel of top housing economists agreed last week.

Participating in a conference call sponsored by the Homeownership Alliance, the chief economists of the education and advocacy group's five founding members said if the Fed does tighten monetary policy in 2004, it won't start turning the screws until summer.

David Berson of Fannie Mae said the central bank won't ratchet up the federal funds rate until mid-year at the earliest.

But even if the rate were to double to two percent over the course of the year, he added, the Fed's posture would still have to be considered "very expansionary."

The Fannie Mae economist said it's also possible the Fed will "remain on the sidelines" for the entire year. And Paul Merski of the Independent Community Bankers of America concurred, saying that the funds rate "could remain at one percent for all of 2004."

David Seiders of the National Association of Home Builders said a "friendly" Federal Reserve is likely to "hold fast" until afer the November elections, while David Lereah of the National Association of Realtors said Fed Chairman Alan Greenspan and company are likely to stay with their "loose posture."

If the Fed does tighten, Seiders said, it will be "easing off the accelerator, not putting on the brakes."

The five economists were equally as optimistic with their forecasts for mortgage rates, which are currently in the 5.8 to 5.9 percent range.

Frank Nothaft of Freddie Mac was the most hopeful, predicting that rates shouldn't be any higher than 6.25 percent by year's end, while Berson's estimate of 6.625 percent was the highest of the group.

But even at that, the Fannie Mae economist said, rates will still be low by historic standards and "won't act as much of a constraint" on housing.

NAR's Lereah also said significantly higher rates are not in the cards. But if they do take off, he added, the increase is most likely to be caused by government borrowing to cover the huge budget deficit and a greater dependence on foreign funds to pay for the growing trade deficit.

"It's been a long time since we've raised the specter of the Twin Towers but there they are," he said.

The five economists agreed, too, that higher mortgage rates aren't likely to force many would-be buyers to the sidelines.

"It's always a negative when rates move up," Berson explained. "But the strength of the current housing market is not just relatively low rates. It's also about how people are feeling about their jobs and income growth. Those things are important factors, too."

Noting that 30-year fixed-rate loans were going for about nine percent in May 2000 and the market was still "very strong," the Fannie Mae economist said "an economy in which rates are moving up in response to economic growth is not necessarily bad for housing."

On the topic of price appreciation, the economists warned that gains would be slower this year. But the only popping sounds that will be heard, they added, will be from champagne as sellers celebrate their profit taking.

Price gains will slow from "an incredibly strong pace" of eight percent last year to a more reasonable 4.6 percent this year, NAR's Lereah said, calling the drop-off "a nice, managed slowing," but no bubble popping.

ICB's Merski also is looking for appreciation to slow to the 4.5 to five percent range, too. "It won't be a tremendous year" for price gains, he said. But it will be "balanced" enough to "put bankers' minds at great ease."

Published: January 21, 2004

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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.