A new year, a new market.

"Bubble, bubble, toil and trouble." The famous line from Shakespeare's Macbeth seems to fit the media's description of the housing market. The acceleration of housing-price appreciation has captured the imagination of many. The press has had a field day as it continues to dwell on the imminent collapse of the housing market, likening it, in some cases, to the bursting of the dot-com bubble.

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With more than 30 years in this industry, I have seen many types of real estate environments. From past experience, I believe it is best to reflect on what history has shown us, rather than make assumptions. From my perspective, it is essential to look at home-price appreciation, rising interest rates, unemployment rates and recessionary cycles.

Before examining some of the facts behind the housing market, I would like to address those who have tried to draw comparisons between the dot-com era and the present housing market. The housing market has built-in cycles, which are anticipated and planned for by industry professionals. The dot-com phenomenon was a moment in time, built on shaky ground. There were few tangible earnings results. Company values were overinflated and could not be substantiated by any quantitative profit measures that would justify their stock prices.

A number of economists and the media have likened today's situation to what happened in Houston in the 1980s and in Los Angeles in the 1990s. However, unlike the situation today, those collapses in the housing market were tied directly to what was occurring with the economy. This means that depreciation in home values was really driven by job dislocation and recessionary cycles--not by rising interest rates. In the case of Houston, the oil industry collapsed. In Los Angeles, the aerospace and defense industries took a huge hit, creating job loss and causing a major exodus from those cities. In those particular areas, we saw real price deceleration driven by a regional industry economic dislocation.

What is happening right now in the housing market is a return to normal levels of activity. It may take a month instead of two days to sell a house. However, houses are still selling, albeit not at the robust pace we saw in 2004 and 2005. This is because there are no signs predicting a recession or job dislocation. Economic forecasters are still predicting that 2006 will be the fifth-best year on record for housing. If you look at the correlation between housing-price appreciation and employment, you can see that employment plays a significant role in the growth of home values (see Figure 1).

Since unemployment is fairly low throughout the United States, it is hard to imagine the "massive" foreclosures and delinquencies that some claim are on the horizon. I believe the word "massive" is a scare tactic rather than a realistic appraisal of what will happen. If you review the last 30 years of foreclosure and delinquency ratios, what you are going to find is that, on a national average, there is no more than a 2 percent swing in foreclosure rates from the best market to the worst.

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No one wins on a foreclosed property--not lenders, not consumers, not communities. That's why our industry is doing everything in its power to make sure a loan does not go into foreclosure. We have some very sophisticated servicing techniques, including new technology to better understand delinquencies. And for those in the press who are predicting that the nearly 40 percent of first-time homebuyers who may be taking no-down-payment loans will get in trouble, I want to remind them that the Department of Veterans Affairs (VA) has been offering these types of loans since the end of World War II with really no greater impact on delinquency and foreclosure rates.

With that said, let's return to some specific examples of what is happening within the industry in terms of price appreciation. While prices did increase in particular areas on an extreme basis, such as San Francisco, Los Angeles, Las Vegas and Miami, where there was anywhere from a 20 percent to 26 percent increase at one point, these areas are returning to a healthier, stable range. Depending on where one lives, home prices may return to single-digit appreciation. We could apply the "Don Ho theory" of tiny bubbles to these geographic areas, which tend to have high-end properties and speculative investments. It is certainly possible to see some value decline, especially in top-end luxury housing and condos, where significant investor speculation drove up sales prices, and areas of extreme price appreciation.

It is important to emphasize again that appreciation is returning to normal levels. There is no "crash" on the horizon. Job availability and consumer confidence are strong. Walnut Creek, California-based PMI Mortgage Insurance Co.'s PMI Risk Index's depreciation risk factors are based on the area's job loss and overall economy. John Krainer, economist at the Federal Reserve Bank of San Francisco, was quoted in the Feb. 19 issue of the San Francisco Chronicle as saying, "Nothing leads to big declines in house prices except job destruction."

In other areas, there is absolutely no sign of a housing slowdown. From the Midwest and Southeast to the far-reaching suburbs of California, the building boom continues. Thousands of homes are being constructed and, in some cases, long waiting lists still exist. For example, Antelope Valley, a suburb of Los Angeles that had previously been built around the defense industry, has an economy that is growing at a faster rate than the rest of California, according to Nancy Sidhu, vice president and senior economist for the Los Angeles Economic Development Corporation. Imagine purchasing a 3,000- or 4,000-square-foot house from the high $300,000s or $400,000s. In this area, this is still possible because the area is thriving on the need for housing from those who can no longer afford to live within the metropolitan Los Angeles area.

Despite these pockets of growth, we all agree that the mortgage market is changing. However, I believe that those who preach "doom and gloom" do not recognize the tremendous opportunity still available to all of us. Mortgage debt outstanding is predicted to grow by 12 percent in 2006, according to Freddie Mac's Office of the Chief Economist in its February 2006 Economic Outlook. This would bring mortgage debt to nearly $8 trillion with mortgage equity of $9 trillion, creating a solid shelter from high foreclosure rates over the next few years.

The prevailing mood among economists is positive. Richard Berner, New York-based Morgan Stanley's chief U.S. economist, sees "accelerating job and income growth as a watershed development that will underwrite higher interest rates," according to a Feb. 8 Reuters story. According to Freddie Mac's February 2006 Economic Outlook, construction is still seen as the country's strongest industry as builders continue to feed the demand from a changing demographic landscape.

From Asians to Hispanics, immigrants are pouring into the "land of opportunity" and buying homes. Culturally, a home represents that they have arrived and achieved a legacy that they can pass on to their future generations. In turn, these generations will invest in additional housing. It is a concrete foundation for our country, and it will continue to grow and flourish as more individuals, families, immigrants and other American dreamers put their hopes and desires into the purchase of a home.

The housing market has solid economic results as its foundation, and represents a type of value that will never go away. Many people who have seen the value of their home grow have also built personal wealth. Over and over, I have heard people talk about how buying a house really helped them get where they are today. This value has helped send children to college, start businesses and move into larger homes. Others have bought vacation homes or purchased investment properties. While I think this kind of purchase will decline overall, there will always be those who believe that investing in real estate is a safe alternative to the stock market.

The fact remains that there is still a major shortage of affordable housing, which means we are still not meeting the demand that is there. Hence, I don't believe the housing market will burst. The future of the housing market and our industry is assured, and our opportunities are great. Housing will not only serve as the glue that holds families and communities together, but it will also remain the driving force of our country's fiscal health.

John M. Robbins. CMB, is chief executive officer of American Mortgage Network (AmNet). San Diego, a wholesale mortgage bank he co-founded in 1997. AmNet is a wholly owned subsidiary of Wachovia Bank NA.

By John M. Robbins, CMB