Near Record Homes Sales Projected for 2003
December 4, 2002
WASHINGTON – After setting records in 2001 and 2002, home sales are projected to slip but remain historically strong next year, according to the National Association of Realtors®.
David Lereah, NAR's chief economist, said that even with the bulk of home sales taking place during the first half of this year, the forecast for total annual housing activity has been trending upward. "The market has continued to perform better than expected, largely in response to the low level of mortgage interest rates which have predominated this year," he said.
"We now expect existing-home sales to total 5.52 million units in 2002, up 4.2 percent from last year's record of 5.30 million," Lereah said. "In 2003, sales should ease-off to 5.29 million, but that would be just shy of the 2001 record – and it'll be the fifth year that existing-home sales exceed the 5.0-million benchmark."
New-home sales are forecast to rise 5.6 percent to a record of 960,000 units in 2002, then ease in 2003 to 924,000 sales, which would be the second highest on record. Housing starts are seen to increase 4.8 percent to a total of 1.68 million units this year, then slip to 1.66 million in 2003.
Lereah expects the 30-year fixed mortgage interest rate to rise gradually to 6.8 percent by this time next year. "Even so, mortgage interest rates are currently hovering near historic lows and aren't likely to rise above 6.5 percent until the second half of 2003 when the economy should be picking up some steam," Lereah said.
NAR forecasts growth in the U.S. gross domestic product to be 2.4 percent for all of this year, but rising to an annual growth rate of 3.6 percent in third quarter of 2003. Consumer price inflation will be a mild 1.5 percent for 2002, with CPI projected at 2.2 percent next year.
Given tight housing inventories across most of the country in 2002, Lereah expects the national median existing-home price this year to be $157,800, up 6.8 percent from 2001. With more balanced conditions expected most of next year, the median price should rise 4.3 percent in 2003.
The median new-home price is projected to be $182,500 for 2002, an increase of 4.2 percent from last year. It's seen to rise 5.4 percent in 2003.
The association expects the unemployment rate to gradually decline to 5.4 percent by the end of next year after peaking at 5.9 percent in the current quarter. Inflation-adjusted disposable personal income is forecast to grow 4.4 percent for 2002 and another 3.4 percent next year.
More detailed information about the association's economic outlook, as well as other analysis of real estate industry statistics, can be found in the December issue of NAR's Real Estate Outlook: Market Trends and Insights. The publication may be purchased by calling 800/874-6500.
Source: The National Association of Realtors®