MARKET WILL COOL WITH A HISS, NOT A POP.

Byline: Gregory J. Wilcox Staff Writer

A hiss, not a pop, will herald the cooling of the hot housing market, the Mortgage Bankers Association said Tuesday in a report analyzing the impact of economic fundamentals on the future of sales prices.

From the MBA's view the landing appears soft thanks to fundamentals, like job and income growth, that will remain solid.

Doug Duncan, the association's senior vice president and chief economist, said there has been a ``crescendo'' building on the issue of housing prices since 2001.

``There is no national housing bubble. (But) there are risks and they are far less dramatic than the hyperbole of the last several months.''

Some regional or local markets where prices are out of line with fundamentals may see some decline.

But ``there is some overstatement of the degree to which declines might occur,'' Duncan said.

Those most likely are markets where there is one large, dominant employer whose prospects are in question.

That seems to rule out Southern California, which has a diverse employment base.

``There is still significant population and job growth in California. Barring a turnaround in the economy, it's reasonable to expect price appreciation,'' Duncan said.

The housing market will cool, though, with appreciation rates slowing. The association anticipates sales to decline by 4 percent to 5 percent next year and price appreciation to be about 4 percent.

That could cause a modest slowing of the economy, but it would still continue to grow.

The MBA analysis also showed that:

--Fixed rates for 30-year mortgages should average 6 percent by the end of this year and move up to 6.5 percent in 2006.

--The wide variety of mortgage products are not putting large numbers of buyers at risk. For example, about 35 percent of U.S. households own their homes outright, about 50 percent have fixed rate loans and 15 percent have adjustable rate mortgages - and half of these are high wealth owners with jumbo loans. The association reasons that leaves 7 percent of borrowers in an interest rate-sensitive position.

``We do not see doom and gloom nor are we being Pollyannaish. We just think there will be a rebalancing of activity.''

The MBA's view reflects that of some independent market watchers who have been predicting a narrowing of price gains and not a wipeout of the robust appreciation.

Jack Kyser, chief economist at the Los Angeles County Economic Development Corp., notes there have been a rash of reports on the bubble issue and many contradict each other.

He agrees with Duncan, though.

Kyser said California's market remains underbuilt, especially for affordable housing, and that will help drive sales and prop up prices.

``When you look at California, you see a healthy and diverse economy that is growing. And you have the strong (housing) demand.''