More economic news from the perspective of the mortgage industry:

Prof: Double-Dip Recession Likely
There is a 60% chance that the economy will slide back into recession this year and a 40% chance of a “slow recovery,” according to Ken Rosen, a professor at the University of California, Berkeley. Speaking at the Commercial Mortgage Securities Association’s CMBS Investors Conference in Miami, Mr. Rosen said the key to real estate demand is job creation and that another round of job cuts could cause the U.S. economy to slip back into recession. Even in case of a recovery, though, Mr. Rosen said he believes the unemployment rate will edge up to 6.5% this year. A war in Iraq will also affect the economy, he noted. “If things go well in Iraq, oil prices could go down, and this is an indicator that things will go well [with the U.S. economy] in the second half,” Mr. Rosen said. The bad news for the mortgage industry is that as the economy recovers, today’s very low interest rates will not be sustained. Mr. Rosen said he expects the interest rate on the 10-year Treasury to rise to 5.5%-6.0% under this scenario, or to fall to 3.0%-3.5% if the economy does not recover. Mr. Rosen said he does not believe the Bush administration proposal to eliminate the taxation of dividends will affect real estate investment trusts, since most investors invest in REITs through pension funds.

MGIC Market Trends Index Slips
The single-family housing market was stable in the fourth quarter, but more areas of the country are showing softness, according to Mortgage Guaranty Insurance Corp.'s national Market Trends Index. The index stood at 6.70 for the quarter, down from 6.90 for the third quarter and 6.92 a year ago. The index uses a scale of 1 to 10, with 10 being the strongest. MGIC said a reading of 6 to 8 indicates a stable market. "The decline in the index from its peak follows a 22-quarter period in which the national MTI stayed above '7', reflecting one of the strongest runs that both the U.S. economy and the nation's housing markets have ever seen," said Neil Siegel, senior market analyst for the Milwaukee-based mortgage insurer. The company looked at 73 metropolitan statistical areas and found seven to be strong, seven weak, and the rest stable. MGIC can be found on the Web at http://www.mgic.com.

(From the email newsletter "BrokerUniverse")