Even with strong economic growth, the job market recovery has been slow, which should help to keep pressure off of interest rates and sustain home sales, according to the National Association of Realtors.
David Lereah, NAR’s chief economist, said job gains have been modest over time but the rate of growth is relatively weak. He also noted that the Bureau of Labor Statistics Household Survey showed there were 1.3 million jobs produced last year.
“That’s a wider measure of jobs than a separate survey of companies because it includes the self-employed, but we still have a way to go to recover all the jobs lost early in the decade,” he said. “The silver lining now is that interest rates probably won’t move much until late in the year when the unemployment rate is expected to drop to 5.4 percent.”
Lereah said the 30-year fixed-rate mortgage should trend up very slowly, reaching 6.3 percent in the fourth quarter. “Keeping interest rates close to historic lows will sustain very strong home sales, which should be only a few percentage points below last year’s record,” he said.
Existing-home sales are projected at 5.92 million this year, second only to 6.1 million in 2003. New homes are seen at 1.04 million sales, while housing starts should total 1.78 million in 2004.
“These are very respectable levels of home sales and construction, which will provide a solid foundation for economic growth,” Lereah said. The U.S. gross domestic product is expected to grow 4.6 percent this year.
Home price appreciation should moderate in 2004, with the median existing-home price projected to rise 4.6 percent to $177,700. The median new-home price should grow by 4.5 percent this year to $202,800.
Inflation will remain tame with the consumer price index increasing only 1.7 percent in 2004, while inflation-adjusted disposable personal income is expected to rise 3.1 percent. The consumer confidence index should improve slowly to 96 in the fourth quarter.
The National Association of Realtors is a trade association representing more than 972,000 members involved in all aspects of the residential and commercial real estate industries.
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