Home Sales Momentum to Carry Into 2005, NAR
November 8, 2004
ORLANDO, Fla. – Expectations for home sales have continued to rise with strong records projected for this year and historically high home sales in 2005, according to a forecast released today by the National Association of Realtors® at NAR's annual REALTOR® Conference & Expo here.
Existing-home sales are projected to rise 7.3 percent this year to 6.55 million* compared with the previous record of 6.10 million in 2003; NAR expects 6.30 million in 2005, which would be the second highest on record. New-home sales will surpass the previous record of 1.09 million in 2003 with sales rising 7.7 percent this year to 1.17 million; a total of 1.07 million new-home sales are seen in 2005.
Housing starts are forecast at 1.93 million in 2004, up from 1.85 million last year; housing construction should come in at about 1.84 million units in 2005.
David Lereah, NAR's chief economist, said the strong forecast results from a steady decline in mortgage interest rates since June. "At the beginning of 2004, forecasters were calling for a gradual rise in mortgage interest rates, but we've experienced a pleasant surprise for the housing sector," Lereah said. "The 30-year fixed-rate mortgage is now hovering close to 5.7 percent, and even thought we're expecting rates to rise slowly they will stay in a historically low range and a strong momentum of home sales will carry over into 2005." In June, Freddie Mac reported the 30-year fixed-rate mortgage averaged 6.29 percent.
Lereah said the 30-year fixed-rate mortgage should stay under 6.0 percent for the rest of this year and then average only 6.5 percent in 2005. "That will help to limit the effect of rising home prices and maintain generally favorable housing affordability conditions in most of the country."
The national median existing-home price is expected to grow by 6.9 percent this year to $181,700, and the median new-home price is seen to increase 9.0 percent to $212,600. "We should see somewhat slower price appreciation in 2005, but as we enter the year with inventories remaining low, home prices will continue to rise a little faster than historic norms," Lereah said. The median existing-home price is projected to rise 5.3 percent in 2005, while the typical new home price will grow by 5.2 percent.
At the same time, inflation will remain tame, with fierce international competition and strong productivity growth keeping prices at bay. NAR forecasts the Consumer Price Index to rise by 2.5 percent this year and 2.1 percent in 2005, while the U.S. gross domestic product should grow 4.4 percent this year and 4.1 percent in 2005. The unemployment rate is expected to decline to 5.0 percent by the second half of 2005.
Inflation-adjusted disposable personal income is projected to increase 3.1 percent in 2004 and 4.2 percent next year, while the consumer confidence index should rise to 110 by the second half of 2005.
Source: National Association of Realtors