Existing-home sales are projected to reach a record level of about 6.49 million this year, a 6.4 percent increase over the previous record of 6.1 million set last year, the National Association of Realtors announced today. New-home sales are also expected to reach a record level this year at 1.15 million, compared with 1.09 million in 2003. Those numbers are down slightly from last month’s projection for existing-home sales of 6.5 million and new home sales of 1.16 million.
David Lereah, chief economist for the association, said month-to-month existing-home sales should not experience significant shifts. “In the first quarter of 2005, the trend will be a gradual ease in the sales pace with the housing market coasting at historically high levels as mortgage interest rates rise,” he said. “At this point, with strong market fundamentals, we project next year will be the second-best overall year for the housing market.”
Housing starts are forecast at 1.94 million in 2004, compared with 1.85 million last year. Similar to the sales market, housing construction is expected to ease in 2005.
Lereah said he expects the 30-year fixed-rate mortgage to rise to 6.3 percent in the first quarter of 2005, after averaging 5.9 percent this year. That projection is up slightly from last month, when the association forecast a maximum 6 percent interest rate in the fourth quarter of this year. “Even with a modest rise in mortgage interest rates, we still have to go back to the mid-1960s to see comparable rates,” Lereah said.
The national median existing-home price is projected to grow by 7 percent this year to $181,800, while the median new-home price should increase 9 percent to $212,500. Price appreciation is expected to slow in 2005, but remain above historic norms with appreciation greater than 5 percent. Last month, the association projected that the median existing-home price would reach $182,700 and the median new-home price would reach $211,100 this year.
NAR forecasts the U.S. gross domestic product to grow 4.5 percent this year, and the Consumer Price Index should rise by 2.6 percent. The unemployment rate is expected to drop to 5 percent during the first quarter of 2005.
Inflation-adjusted disposable personal income is forecast to rise 3 percent in 2004, while the consumer confidence index should improve to 104 in the first quarter of next year.
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