Existing-home sales should reach a record 6.5 million this year, a 5.7 percent increase over last year’s record 6.1 million sales, the National Association of Realtors reported today in its latest monthly forecast for the year. Meanwhile, new-home sales are expected to rise to a record 1.16 million, or 7.1 percent higher than last year’s numbers. And housing starts are forecast to increase 4.8 percent to 1.94 million in 2004, the strongest pace since 1978.
This existing-home sales forecast represents a slight improvement over last month’s forecast, which called for 6.45 million existing-home sales this year. This month’s new-home sales forecast for the year is down slightly from last month’s forecast, which estimated that new-home sales would reach 1.2 million this year.
David Lereah, chief economist for the national association, said in an announcement today 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 rise to 6 percent in the fourth quarter, the average rate for the entire year should be 5.9 percent, which is 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. Last month, the association’s August forecast called for existing home prices to climb 7.3 percent to $182,400 this year, with the median price of new homes increasing 8.3 percent to $211,100.
He 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 reach 105 by the fourth quarter.
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