Future Residential Mortgage Demands and Supplies

Abstract

THERE HAVE BEEN a number of published speculations recently about long-term developments in the nation's residential mortgage market. Taken as a whole, they are interesting if only because of the differences in viewpoint found. Conjectures run the gamut from expected glut to severe shortage, and there are those, of course, that anticipate the millenium, i.e., market equilibrium with all legitimate needs being accommodated.' One might wonder about such variations in an era in which scientific forecasting techniques are being applied increasingly to economic phenomenon. Yet, long-term forecasting in particular markets still seems to be very much of an art. While it is readily apparent that through computer simulation with quantitative models the task of making projections is simplified and the scope of the work is extended, a forecast implies that the range of the future possibilities has been greatly narrowed. In narrowing down the possibilities, judgments still have to be made about certain crucial and of magnitude that have not been worked into the endogenous mechanism of the model, and about such matters there apparently can be differences of opinion. But what are the crucial relationships and orders of magnitudes? This is the question to be considered below. The intent of the discussion is to provide the reader with a perspective that should be helpful in making judgments about the reasonableness of particular forecasts. Let the reader be forewarned, however. Despite the pious declaration of intent, the author succumbed to the temptations that accompany the task. Sprinkled throughout the remarks to follow is a viewpoint about future mortgage market developments which, when fully exposed, will provide little comfort to those concerned with a pressing and important social problem, i.e., lowincome housing.