Expert says he expects housing market to cool

DULUTH - Federal Reserve Bank of Atlanta President Jack Guynn expects the red-hot housing market to cool in coming months, but the trend should have a limited effect on the economy.

In a speech before bankers, developers and homebuilders Wednesday, Guynn said increasing mortgage rates and rising inventories of single-family homes may signal an end to the five-year U.S. housing boom.

Other reasons for concern included the wide range of affordable credit options geared to help new homeowners, such as interest-only mortgages and even 50-year mortgages. It's unclear how these loan products will perform if the housing market slows.

"The mortgage credit innovations that have made homes more affordable to buyers, at least in the short run, have not been fully tested in a period of rising interest rates and a moderating economy," Guynn told a packed meeting of the Council For Quality Growth, a Duluth-based regional lobbying group for the metro Atlanta development industry.

"I suspect - based on what I've heard from anecdotal reports - that lenders and borrowers have not always asked all the 'what if' questions that are basic to risk management," Guynn said. "It's quite likely that some borrowers will have a hard time handling their payments in different circumstances."

That appears to be the case already for many borrowers in metro Atlanta, where home foreclosure rates hover near the top of all U.S. metropolitan areas. Gwinnett ranked third behind only Fulton and DeKalb every year since 2000 in foreclosures, according the Atlanta-based real estate tracking firm EquiSystems LLC.

Gwinnett saw 5,122 foreclosures last year, 5,130 in 2004 and 4,735 the year before.

In later remarks, Guynn said some borrowers are feeling the pinch of rising mortgage payments, but high foreclosure rates should remain a problem of local markets and "not systemic" of the broader U.S.


Guynn tempered too much concern about the housing industry, a key cog in the Gwinnett economy providing jobs in banking, construction and real estate. Guynn said banks are well positioned to absorb home lending losses and that the level of home building is so high it can support ongoing demand for home products and related goods.

Guynn's outlook didn't appear to dampen enthusiasm in the lending business.

Dave Boccolucci, Bank of North Georgia's senior vice president of construction lending, said, "I think we'll see some slowing, but not much. We've still got a lot of housing activity out there."