Record Expected for Existing-Home Sales in 2004, Says NAR
June 8, 2004
WASHINGTON (June 8, 2004) – Unexpectedly strong job growth will buffet the impact of higher interest rates and help to push existing-home sales to a record in 2004, according to the National Association of Realtors®.
David Lereah, NAR's chief economist, said job growth could reach 3 million this year. "The economy is moving quickly now and the Fed is likely to raise short-term interest rates on June 30," he said. "The market appears to have anticipated the move and has priced it into 30-year mortgage rates, but the cost of financing remains historically low and strong demand will push home sales to a record this year."
The 30-year fixed-rate mortgage is expected to reach 6.9 percent by the fourth quarter. "At the same time, unemployment should drop to 5.3 percent, so we continue to have a very favorable backdrop for housing," Lereah said.
NAR projects existing-home sales to hit a record 6.17 million in 2004, which would be 1.2 percent higher than last year's 6.10 million record. New-home sales should be essentially stable, slipping 0.4 percent to 1.08 million this year, just shy of the record 1.09 million in 2003, while housing starts are seen to be fairly even, down 0.3 percent to 1.84 million.
The median existing-home price is forecast to rise 5.4 percent in 2004 to $179,200, while the median new-home price should grow by 7.9 percent to $210,400.
Lereah said the U.S. gross domestic product is forecast to grow 4.7 percent this year, with inflation remaining under control. The Consumer Price Index is projected to rise 2.4 percent in 2004. "Energy prices could retreat, but more importantly, productivity gains mean labor costs should stay down. This means there is no cost-push inflation in the pipeline where rising costs would push up prices, and long-term interest rates will not be moving up significantly this year or next," he said.
Inflation-adjusted disposable personal income should grow by 3.9 percent in 2004, while the consumer confidence index is expected to rise to 96 in the fourth quarter.
More detailed information about the association's economic outlook, as well as other analysis of real estate industry statistics, can be found in the June 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