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Housing down, but economy up

By Marilyn Geewax | Friday, September 21, 2007, 01:26 PM

Edward Lazear, chairman of President Bush’s Council of Economic Advisers, said Friday he believes the housing market will deteriorate, yet the economy will improve next year.

During the taping of C-SPAN’s “Newsmakers” program, which will air Sunday, Lazear told reporters that the record-setting pace of mortgage foreclosures will worsen.

In coming months, more of the low “teaser” rates offered on mortgages between 2003 and 2006 will expire and reset to higher levels, sending up monthly payments, he said. That in turn, will increase foreclosures and drive down home values. Even after this summer’s home price decline in much of the nation, “I wouldn’t say it’s reached its bottom,” he said.

Still, largely because of rising exports, he sees a brightening economic outlook, following the moderate 2-percent growth of this year’s second half. “2008 will be a stronger year,” he predicted.

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