Housing Market Expected to Coast From Record Highs
October 5, 2004
WASHINGTON – After setting unprecedented highs this year, home sales should ease but remain historically strong, according to the National Association of Realtors®.
Existing-home sales are projected to easily set a record of about 6.49 million* in 2004, well above the previous record of 6.10 million last year. New-home sales also will hit a record with 1.15 million, compared with 1.09 million in 2003.
David Lereah, NAR's chief economist, 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 seen to ease in 2005.
Lereah 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. "Even with a modest rise in mortgage interest rates, we still have to go back to the mid 1960s to see comparable rates," he said.
The national median existing-home price is projected to grow by 7.0 percent this year to $181,800, while the median new-home price should increase 9.0 percent to $212,500. Price appreciation is expected to slow in 2005, but remain above historic norms with appreciation greater than 5 percent.
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 5.0 percent during the first quarter of 2005.
Inflation-adjusted disposable personal income is forecast to rise 3.0 percent in 2004, while the consumer confidence index should improve to 104 in the first quarter of next year.
Source: The National Association of Realtors