Home sales momentum will continue through the remainder of 2004 and into next year, the National Association of Realtors forecast today at its annual conference and expo in Orlando, Fla.
Existing-home sales are projected to rise 7.3 percent this year to 6.55 million compared with the previous record of 6.1 million in 2003, according to NAR. The group also expects 6.3 million existing-home sales in 2005, which would be the second highest on record. New-home sales this year will surpass the previous record of 1.09 million in 2003 with sales rising 7.7 percent to 1.17 million. A total of 1.07 million new-home sales are predicted for 2005.
NAR forecasts housing starts in 2004 to total 1.93 million, up from 1.85 million last year. Housing construction in 2005 should come in at about 1.84 million units.
The strong forecast comes from a steady decline in mortgage interest rates since June, when Freddie Mac reported the 30-year fixed-rate mortgage averaged 6.29 percent.
“At the beginning of 2004, forecasters were calling for a gradual rise in mortgage interest rates, but we’ve experienced a pleasant surprise for the housing sector,” said David Lereah, NAR’s chief economist. “The 30-year fixed-rate mortgage is now hovering close to 5.7 percent, and even though we’re expecting rates to rise slowly, they will stay in a historically low range and a strong momentum of home sales will carry over into 2005.”
Lereah said the 30-year fixed-rate mortgage should stay under 6 percent for the rest of this year and then average only 6.5 percent in 2005.
The national median existing-home price is expected to grow by 6.9 percent this year to $181,700, and the median new-home price is forecast to increase 9 percent to $212,600.
“We should see somewhat slower price appreciation in 2005, but as we enter the year with inventories remaining low, home prices will continue to rise a little faster than historic norms,” Lereah said.
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The median existing-home price is projected to rise 5.3 percent in 2005, while the typical new home price will grow by 5.2 percent.
At the same time, NAR predicts that inflation will remain tame, with fierce international competition and strong productivity growth keeping prices at bay. The Consumer Price Index will rise by 2.5 percent this year and 2.1 percent in 2005, while the U.S. gross domestic product should grow 4.4 percent this year and 4.1 percent in 2005, according to NAR. The unemployment rate is expected to drop to 5 percent by the second half of 2005.
Inflation-adjusted disposable personal income is projected to increase 3.1 percent in 2004 and 4.2 percent next year.
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