This storm too shall pass

For the past several years, real estate has kept the economy running strong while other sectors struggled to regain momentum after the tech bust.

Now it's real estate's turn to get rained on, with the U.S. Department of Justice filing an antitrust lawsuit against NAR's Internet display policy, Hurricane Katrina destroying hundreds of thousands of properties in the Gulf region, and a blue ribbon tax commission appointed by President George W. Bush eyeing potentially disruptive changes to the mortgage interest deduction and capital gains taxes.

At the same time, media and Wall Street doomsayers continue to see housing bubbles bursting, national banking conglomerates are still trying to enter brokerage and threby disturb the industry's intensely competitive playing field, and secondary market companies Fannie Mae and Freddie Mac are in danger of being whittled down on Capitol Hill.

To boot, rising oil prices are imperiling eonomic growth, and the Federal Reserve is promising more interest reate hikes.

Despite this torrent of bad news, good days are still ahead for real estate.

Oil prices will come back down. They're defying gravity now, but that won't last. Rebuilding in the Gulf region will help, too.

Interest rates will stay historically low, peking at 6.7 percent. And few markets will see downturns. Housing markets continue to be fundamentally sound, with sales fuiled not by irrational buying but by continuing low mortgage rates.

Yes, sales will be cooler than they've been for the past few years. But that's a plus, because as inventories rise modestly, appreciation will cool to a highly sustainable 4 percent to 7 percent level.

In the political arena, talk about tinkering with the MID and capital gains is always troubling, but the real estate industry will come together with a strong educational message to Congress about the crucial role the MID and other housing-friendly policies play in keeping the economy and households strong. We made a strong case against potentially dangerous tax changes 10 years ago, and we'll do it again.

So in the end, the sun will come out for the housing industry. The housing markets will experience a soft landing, and the torrent of bad news will pass like a storm in the night.

This article was written by David Lereah. David Lereah is a senior vice president and chief economist for the National Association of Realtors.