NAR expects slowing market to pick up in ?02

After setting record sales in the first half of this year, the housing market is expected to slow during the second half and then rise as the economy improves next year, according to a release from the National Association of Realtors.

David Lereah, NAR's chief economist, said the combination of low interest rates, low unemployment and strong household formation fostered record sales during the first half of the year.

"Clearly, the housing market has peaked and sales are now slowing. However, home resale activity will remain about the 5 million mark, which is still a strong number," Lereah said. "We now expect 5.19 million existing-home sales this year, up 1.6 percent from 2000 very close to the record 5.21 million in 1999."

"We project the thirty-year fixed mortgage interest rate to edge up to 7.1 (percent) by the end of the year, still low by historic standards," Lereah said. "This is keeping the door to homeownership open for many first-time buyers, who in the process are preserving the trade-up market as sellers find a fairly ready market for their property," he added.

Looking ahead, Lereah expects sales to head upward in 2002. "There's still a lot of momentum in the housing market, and with an improving economy next year it looks like existing-home sales will rise 0.7 percent a small increase but a new record with 5.23 million sales expected in 2002," he explained.

NAR forecasts new-home sales to rise 4 percent to a new record of 912,000 units this year, and housing starts are forecast to rise 2.7 percent to a total of 1.61 million units in 2001.

The association expects the national median existing-home price this year to be $147,200, an increase of 5.9 percent over 2000, while the typical new home price is expected to be $177,800 in 2001, up 5.2 percent from last year.

"These price increases are a little higher than historic norms, and simply reflect the strong demand relative to housing supply in many areas," Lereah said.

NAR projects U.S. economic growth, as measured by the Gross Domestic Product, to be 1.6 percent for 2001, rising from a slim 0.2 percent in the second quarter to 2.7 percent by the end of the year. Consumer price inflation for this year should be 3.1 percent.

The association projects the unemployment rate to rise to 5 percent by the end of 2001, still low in historic terms. Inflation-adjusted disposable personal income is forecast to grow a strong 3.8 percent this year, largely the result of tax rebate checks.