Housing Bubble

NAR predicts record home sales for 2003

June 04, 2003

WASHINGTON – Stronger-than-expected home sales activity so far this year, combined with a continued drop in mortgage interest rates, means the housing sector is likely to set a sales record in 2003, according to the National Association of Realtors®.

David Lereah, NAR's chief economist, said the forecast has been steadily upgraded all year. "The performance of the current housing market is nothing short of astounding," he said. "Record low mortgage interest rates, a growing number of households, rising consumer confidence and an improving economy mean we probably will set a third consecutive record for both existing- and new-home sales this year."

Lereah expects 5.59 million existing-home sales in 2003, up 0.5 percent from the record of 5.57 million sales last year. New-home sales are projected at 974,000 units, up 0.1 percent from 2002. Housing starts should rise 1.0 percent to a total of 1.72 million units in 2003.

"The 30-year fixed mortgage interest rate should remain historically low and edge up only slightly to about 5.7 percent in the fourth quarter, stimulating both home sales and refinance activity – both should contribute to overall economic growth in 2003," Lereah said.

The national median existing-home price is projected to rise 5.5 percent in 2003 to $166,900, while the median new-home price should grow by 3.0 percent this year to $193,200.

"Although existing-home price gains this year will be less than the 7.0 percent overall rise in 2002, they'll still rise above historic norms," Lereah said. On average, prices rise at the rate of inflation, plus one-to-two percentage points.

Consumer price inflation is likely to be 2.0 percent in 2003. Growth in the U.S. gross domestic product is projected to improve during the second half of the year, reaching an annual growth rate of 3.7 percent by the fourth quarter.

NAR forecasts inflation-adjusted disposable personal income to grow 2.7 percent this year, while the unemployment rate should be fairly stable, averaging 6.0 percent in 2003. The consumer confidence index is expected to rise to 93 by the end of the year.

More detailed information about the association's economic outlook, as well as other analysis of real estate industry statistics, can be found in the June issue of NAR's Real Estate Outlook: Market Trends and Insights. The publication may be purchased by calling 800/874-6500.

The National Association of Realtors®, "The Voice for Real Estate," is America's largest trade association, representing approximately 880,000 members involved in all aspects of the residential and commercial real estate industries.

Source: National Association of Realtors®