Housing strength hinges on rates
February 10, 2003
NAR expects sustained growth this year with slow momentum
Inman News Features
The National Association of Realtors today said that it expects sustained strength in home sales this year as long as mortgage interest rates remain favorable.
NAR's Chief Economist David Lereah said weak economic growth at the end of 2002 means it will take a little longer for momentum to build this year.
"Growth in the U.S. gross domestic product should rise to 2.9 percent this year from 2.4 percent in 2002; however, we project the GDP will pick up steam and reach an annual growth rate of 4.1 percent in the fourth quarter," he said. "The silver lining will be a continuation of affordable mortgage interest rates, especially during the first half of this year."
Lereah expects the 30-year fixed mortgage interest rate to average 6.2 percent during the first half of 2003 before rising to 6.6 percent in the fourth quarter.
NAR forecasts 5.4 million existing-home sales in 2003, second only to 5.56 million sales in 2002. At the same time NAR expects 959,000 new-home sales, which would be down modestly from a record 976,000 sales last year. Housing starts are forecast at 1.69 million units this year, slightly below the 1.71 million units recorded in 2002.
The rise in the national median existing-home price is expected to slow this year, but with a persistence of lean inventories of homes available for sale it should continue to rise at a rate above historic norms.
"We expect the median existing home price to increase 4.8 percent in 2003 to $165,800," said Lereah. "At the same time, consumer price inflation should be only 2.5 percent - so home price appreciation will remain a little above the historic norm of one-to-two percentage points above inflation."
NAR expects the median new-home price to rise 4.2 percent in 2003 to $192,900.
Lereah projects the unemployment rate to gradually decline to 5.6 percent by the end of the year. Inflation-adjusted disposable personal income is seen to grow 3.5 percent in 2003 following a 4.5 percent rise last year, while the consumer confidence index is expected to rise from an estimated fourth-quarter 2002 reading of 82 to an index of 113 by the end of this year.
NAR is a national trade association with more than 840,000 members involved in all aspects of the residential and commercial real estate industries.
Copyright: Inman News Service