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Fed Chair is in the house
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March 8, 1999: 4:56 p.m. ET
Greenspan sees strong housing market as mortgages fall and income rises
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NEW YORK (CNNfn) - Federal Reserve Chairman Alan Greenspan set his sights on the booming housing market Monday, noting how income gains have driven housing demands to extraordinary levels.
Greenspan, speaking before the Mortgage Bankers Association in Washington, D.C., did not talk about interest rates as he read from his prepared statement.
"The U.S. economy has turned in a spectacular performance in recent years," he said. "Recent years have been especially good for the housing sector. The improvement in affordability has been a key factor in elevating the home ownership rate to an all-time high."
Greenspan said starts of single-family houses surged to 1.27 million units in 1998, the highest level since the late 1970's. He said multifamily construction has also been strong, and shipments of manufactured homes have been rising, accounting for nearly a fifth of new housing units last year.
"Home sales, too, have been robust," he said, "spurting to nearly 900,000 units in 1998 -- an all-time high. At the same time, existing home sales climbed to about 4-3/4 million, also a record."
Greenspan said the decline in mortgage rates and a rise in household income have offset rising home levels and lifted the National Association of Realtors' affordability index for existing homes last year to its highest level.
"The improvement in affordability has been a key factor in elevating the home-ownership rate to an all-time high," he said. "Two-thirds of American households now own their own homes, up sharply from just a few years ago."
Greenspan noted that mortgage refinancings have fallen off, even though many loans appear ripe for refinancing.
"One wonders how many of those who have not refinanced will do so, even if mortgage rates remain at their current levels," the Fed Chair said.
Greenspan also discussed how technology has improved the way mortgages are underwritten, serviced and originated.
"Your customers can use the Internet to search for the best rates, and you now use e-mail quotes to field lenders instead of typed and faxed quote sheets," he said. "These developments enabled the industry to handle the extraordinary volume of mortgages last year with ease, especially compared to the strains that had been experienced during refinancing waves in the past."
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