Fannie Mae chief says investor-driven prices could `soften'

Fannie Mae Chief Executive Officer Franklin D. Raines warned that housing prices may be rising too fast in some markets, causing them to "soften" as demand wanes.

Gains in some areas of the country are being fueled in part by investor demand, Raines told a Mortgage Bankers Association of America conference in San Francisco. Washington-based Fannie Mae, the biggest provider of U.S. mortgage financing, has come under scrutiny over its financial reporting.

"I've spent a lot of time over the past few years arguing that there is no `housing bubble,'" Raines said. "And nationally, that's still true. But we are seeing investor-driven price increases in certain markets. ... And these markets could soften as investor demand wanes, as it inevitably does."

An index of housing prices is up 9 percent in the fiscal second quarter from a year before, he said.

Bloomberg News