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Nov. 7, 2003 |
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SAN FRANCISCO (November 7, 2003) – After surging unexpectedly in 2003, the housing market is projected to coast at somewhat lower yet historically strong levels next year, according to the National Association of Realtors®. The housing and economic forecast was presented at a news briefing by David Lereah, NAR's chief economist, during the annual National Association of REALTORS® Conference & Expo. More than 23,000 Realtors® and guests are attending the Nov. 7-10 meetings in San Francisco. Lereah said historically low mortgage interest rates accounted for much of this year's record housing activity. "Even with the favorable affordability conditions in most of the country, we can't overlook the other strong market fundamentals that will continue to drive strong home sales through 2004 and beyond," he said. "Echo boomers – the children of the baby boom generation and roughly the same size – are just at the beginning of the age when people typically buy their first home. Combined with the impact of immigrants and generally strong household creation expected for many years to come, the underlying demand for housing is not about to evaporate." On an annual basis, the 30-year fixed-rate mortgage is expected to rise gradually from an average of 5.9 percent this year to an average of 6.5 percent in 2004. "Even with the modest increase, we have to go back to the 1960s to see two comparably affordable years for mortgage interest rates," Lereah said. "This means 2004 will be a better year for home sales than earlier projections." NAR forecasts a record of 5.99 million existing-home sales this year, up 7.7 percent from last year's record of 5.57 million sales. New-home sales for 2003 are expected to grow by 7.9 percent to a record of 1.05 million units. Housing starts are seen to rise 4.6 percent to a total of 1.78 million units this year, the highest level since 1986. Lereah said 2004 is expected to be the second-best year for housing. "We now project 5.60 million existing-home sales and 960,000 new-home sales next year, with housing starts at about 1.61 million units," he said. The national median existing-home price is forecast to rise 8.8 percent this year to $172,100, while the median new-home price should increase 3.7 percent to $194,600. Home price appreciation is expected to slow in 2004 to a rate closer to historic norms, with the median existing-home price increasing 4.3 percent and the typical new-home rising by 5.5 percent. Because of a blistering 7.2 percent annual growth rate in the third quarter, Lereah now expects growth in the U.S. gross domestic product to be 3.0 percent for all of this year before growing another 4.5 percent in 2004. Consumer price inflation should be 2.3 percent for 2003 and only 1.6 percent next year. "With the economy growing, the unemployment rate should gradually decline to 5.5 percent by the fourth quarter of 2004," Lereah said. Inflation-adjusted disposable personal income is projected to grow 2.5 percent this year and 4.2 percent in 2004, while the consumer confidence index should rise gradually to 98 by the fourth quarter of 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 November issue of NAR's Real Estate Outlook: Market Trends and Insights. The publication may be purchased by calling 800/874-6500. The National Association of Realtors®, "The
Voice for Real Estate," is America's largest trade association,
representing more than 962,000 members involved in all aspects
of the residential and commercial real estate industries. |