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Housing Experts Wary of Bubble Fatigue
By Ilaina Jonas NEW YORK (Reuters) - Bubble or not, the U.S. housing market has stayed afloat at a high altitude for the past two years. So what do experts look for as the first signs of fatigue in a frothy housing market? Mark Zandi, chief economist for Economy.com, said it won't be buyers who will disappear. Instead, he believes disgruntled sellers will bring the market to a halt. "People will start pulling their homes off the market if they think they can't sell it at a 'fair price,' which is now perceived to be a very high price," he said. While debates about whether the robust housing market will burst like a bubble or land like a slowly deflating balloon dominate discussions everywhere -- from think tanks to cocktail parties -- most agree that what goes up must come down. "You'll see transactions fall off very rapidly," Zandi said. "It's not that prices are coming down. It's that there's nothing selling. The first piece of data where you get a sense of that is not home sales. It's mortgage applications." If applications fall, particularly in periods where interest rates rise, a housing freeze is likely to arrive. "That would indicate to me after a week or two (of lower mortgage applications) that something fundamental is going on in these markets," he said. According to the Mortgage Bankers Association's latest survey, applications for U.S. home mortgages decreased last week. Its seasonally adjusted index of mortgage application activity fell 1.6 percent to 672.6 in the week ended April 15. The dip in mortgage applications came despite a drop in fixed mortgage rates, which some analysts believe is an indication of waning housing demand. Fixed 30-year mortgage rates averaged 5.83 percent last week, excluding fees, down 12 basis points from 5.95 percent the previous week, according to the MBA. Continued ... Source: reuters.comFor more information about balloon mortgage: Information about loan
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