- 4 July, 2004 -

Are we in for a decline in housing values? At least one prominent economist is predicting a decline in U.S. housing values in the near future. Cary Leahy, senior economist with Deutsche Bank, told an audience of investors at a meeting in New York sponsored by the Association of German Mortgage Banks that he predicted an average decline of 10% to 20% in housing values across the United States. The economist predicted a tighter money policy from the Federal Reserve, including a 300-basis-point hike in interest rates between June 2004 and the end of 2005. "The big question in credit markets is ‘Can they do 50 bp (basis points) in August after 25 bp in June?'" Leahy said. Many believe speculators invested heavily in real estate during the last two or three years with the historically low interest rates. If the rates rise, as predicted, this may lead to a slowdown in real estate sales and a drop in real estate prices.

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