WASHINGTON — Economic growth is expected to remain above historic averages over the next two years, stimulating job growth and sustaining home sales despite higher interest rates, according to the National Association of Realtors.
David Lereah, NAR’s chief economist, said home sales would be strongest during the first half of this year.
“With mortgage interest rates bottoming-out in March, we’ve had a big rush of home buyers this year,” he said. “Home sales should hold close to record territory for a couple months, then ease in the second half of the year but remain at historically strong levels.”
The 30-year fixed-rate mortgage is expected to rise gradually to 6.6% by the fourth quarter.
“Higher interest rates will hurt lower income buyers who are at the margins of qualifying for a loan, but a rising stock market should help upper income buyers,” Lereah said. “A challenge remains to preserve housing opportunities for low-to-moderate income households.”
Existing-home sales are projected to reach 6.17 million in 2004, 1.2% higher than the record 6.1 million last year. New-home sales should come in at 1.08 million, nearly level with last year’s record. Housing starts are forecast at 1.84 million in 2004, slightly below the 1.85 million posted in 2003.
The median existing-home price is projected to increase 4.7% this year to $178,100, while the median new-home price should rise 5.1% to $205,000.
NAR’s first-quarter metro-area home price report, covering changes in 126 metropolitan statistical areas, shows 35 areas with double-digit annual increases in median existing-home prices and 16 areas posting generally small declines. Most markets, 80, rose faster than the norm for price appreciation.
The strongest price increase was in the Riverside-San Bernardino area of California, where the first-quarter median price of $258,900 was 32.9% above a year earlier. Next came Las Vegas, at $224,900, which was 31.3% above the first quarter of 2003, followed by Anaheim-Santa Ana (Orange County, Calif.), with a first-quarter median price of $572,500, up 28.1% in the last year.
Median first-quarter metro resale prices ranged from $82,300 in South Bend-Mishawaka, Ind., to more than seven times that amount in the San Francisco Bay area, which was $597,300. The second most expensive area was Anaheim-Santa Ana followed by San Diego at $483,000.
Other low-cost markets include Peoria, Ill., the second least-costly area at $83,900, and Springfield, Ill., with a first-quarter typical resale home price of $84,000.
Housing prices may play a role in the November elections. Two of three Americans are so concerned about the cost of housing in their communities that they would be more likely to vote for a candidate who works to make housing more affordable, according to the second National Housing Opportunity Pulse, conducted recently by NAR.
The survey found that 81% of voters would like to see government place a higher priority on making housing more affordable for renters and homeowners alike.
The U.S. gross domestic product is forecast to grow 4.7% this year and 4.3% in 2005, both above the historic average of about 3.2%, Lereah said.
“These strong growth figures are supported by some pent-up business spending this year, and a reduction in the trade deficit is expected next year,” he said. “That is stimulating job growth, so the unemployment rate should drop to 5.4% by the end of the year.”
The consumer price index is forecast to rise 2% this year, with a rise in core inflation and additional pressure from job growth. An NAR spokesman said the association would increase its 2% estimate for inflation only slightly because of increases in oil and steel prices. Nevertheless, NAR does not believe the increase will be big enough to alter its forecast.
Inflation-adjusted disposable personal income should grow by 3.6% in 2004, while the consumer confidence index is expected to rise 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 May issue of NAR’s Real Estate Outlook: Market Trends and Insights. The publication may be purchased by calling 800/874-6500. Information about NAR is available at http://realtor.org.