NAR expects home sale records in 2004

Existing-home sales will increase about 6.5 percent this year to 6.5 million.

New-home sales also are expected to rise to a record level this year, to 1.16 million, up 7.1 percent. Housing starts are forecast to increase 4.8 percent to 1.94 million in 2004, the strongest pace since 1978 when baby boomers were entering the market en masse.

David Lereah, NAR’s chief economist, said in an NAR news release that a continued decline in mortgage interest rates is creating favorable market conditions at a time when household formation is rising.

Though NAR projects the 30-year fixed-rate mortgage to slowly rise to 6 percent in the fourth quarter, the average rate for the entire year should be 5.9 percent, the second-lowest annual average since the mid 1960s. The lowest rate in recent years was 5.8 percent in 2003.

“Price appreciation is projected to be only slightly higher than historic norms next year, as supply levels come closer to market demand. Although we expect the number of home buyers to continue to exceed the number of sellers, the situation should improve in 2005,” Lereah said.

The national median existing-home price for all of 2004 is expected to rise 7.5 percent to $182,700. At the same time, the median new-home price will grow by 8.9 percent to $212,300.

“Home prices will continue to rise above historic norms as long as we have tight inventories of homes available for sale,” Lereah said.

He expects the U.S. gross domestic product to grow 4.5 percent this year, while the Consumer Price Index should rise by 2.7 percent. The unemployment rate is projected to drop to 5.2 percent in the fourth quarter.

Inflation-adjusted disposable personal income is forecast to increase 2.9 percent in 2004, while the consumer confidence index should trend up to 105 by the fourth quarter.