Some Markets Could Be at Risk of Home Price Declines.

Washington -- The housing market shows no signs of slowing down, but if demand weakens in certain areas of the country such as the upper Midwest where there are fewer jobs, or if there is a recession, the market will likely see some price declines, according to the chief economists of the Homeownership Alliance here.

By early 2006, some of the overheated markets in California, Nevada, Arizona and Hawaii could see a slowdown in the double-digit price gains, said Frank E. Nothaft, chief economist, Freddie Mac, during a telephone conference in which economists gave their outlooks for the second half of 2005 and beyond.

"It's going to be very solid for the remainder of the year. There will be a reasonable cooling-off period but no crash in these markets," he said.

David Lereah, chief economist, National Association of Realtors, said the weaker economy has actually helped the housing market, keeping rates low. "Yes there is froth in the markets, but it's not a bad word," Mr. Lereah said. "Froth can be healthy. The media is carried away by the word," he said. "It's the effervescence rather than the popping of bubbles that is happening locally around the country."

Sixty-six metro areas have experienced price appreciation where demand is greater than the very lean supply of inventory of homes, but Mr. Lereah said he thinks the market is "very healthy, even though we do have very strong demand." Housing starts rose back over two million units in April after taking a tumble ...