National Real Estate Outlook

New mortgage applications are up. Pending home sales are up. The economy is expanding. Unemployment is at 4.6 percent. And mortgage rates are still historically low.

What kind of housing bust is this anyway?

All the dismal reports about the real estate market overlook the realities in the market place, some housing experts say.

The housing correction -- expressed through new home starts -- "may be closer to [its] trough than to [its] peak," says Federal Reserve vice chairman Donald L. Kohn.

Today's "unusually low" long-term mortgage-rate environment "stands in sharp contrast to some past downturns in the housing market that followed actions by the Federal Reserve to tighten credit conditions significantly," Kohn adds.

James Glassman of JP Morgan Chase is equally optimistic. He says 30-year fixed-rate mortgages at 5.75 percent are a distinct possibility if long-term rates in the global bond market keep easing. The current cyclical downturn in housing "is not your classic interest-rate story" he says.

Perhaps the most blunt appraisal comes from Mike Moran, chief economist of Wall Street’s Daiwa Securities America. Moran says the financial press is taking a normal and long-predicted cyclical rebalancing and "portraying it as a catastrophe."

Source: Kenneth R. Harney, Washington Post Writers Group (10/15/2006)