NAR: Housing market setting new record

Both the existing- and new-home markets will set records for 2001 and near-record activity is expected to continue in 2002, according a Jan. 8 news release from the National Association of Real-tors.

Dr. David Lereah, NAR's chief economist, said housing outperformed the ex-pectations of many analysts in the last year.

"With the exception of the uncertainty cast by the fallout of Sept. 11, our outlook for the housing market grew bright-er as the year progressed. When we get the December data later this month, we expect to see total existing-home sales for 2001 to be 5.25 million, up 2.5 percent from 2000 and surpassing the previous record of 5.21 million, set in 1999," he said.

"Total sales will be fairly even this year, with existing-home sales projected to reach 5.23 million in 2002, down a negligible 0.5 percent," he added.

NAR also forecasts new-home sales for 2001 to rise 2.5 percent from 2000 to a total of 902,000 units, surpassing the previous record of 885,000 set in 1998, then slip 3.2 percent this year to 874,000 units. Housing starts are expected to rise 1.7 percent to a total of 1.60 million units for 2001, and then decline by 4.0 percent this year to 1.54 million.

Lereah expects U.S. economic growth, as measured by the Gross Domestic Pro-duct, to rise to a positive 1.9 percent growth rate in the second quarter.

"Much of our economic activity is be-ing sustained by the strong housing market, which will lead us out of the shallow recession which began last spring," Lereah said. Consumer price inflation for 2002 should be only 1.8 percent.

NAR projects the 30-year fixed mort-gage interest rate to rise to 7.3 percent by the third quarter. "Even with this fairly modest increase in mortgage interest rates, they will remain low by historical comparisons. However, the spread be-tween fixed and adjustable rates has in-creased, meaning adjustable-rate mortgages may become more attractive to first-time home buyers, especially in higher-cost markets," Lereah said.

NAR expects the national median ex-isting-home price for 2001 to be $146,600, an increase of 5.5 percent over 2000, then rise by 4.0 percent this year to $152,400. The typical new home price is projected to be $171,200 in 2001, up 1.3 percent from 2000, then rise by 4.7 percent this year to $179,200.

The association projects the unemployment rate to rise to 6.1 percent be-fore it eases in the fourth quarter. Infla-tion-adjusted disposable personal in-come is forecast by NAR to grow 2.1 percent this year.