Housing Bubble

Realtors 2003 home sales forecast stronger than earlier predicted

July 09, 2003

WASHINGTON – The volume of home sales this year will be stronger than earlier projected and should easily surpass last year's record, according to the National Association of Realtors®.

David Lereah, NAR's chief economist, said historically low mortgage interest rates are the primary factor. "Lower than expected mortgage interest rates have brought more buyers into the housing market, offsetting sluggish economic growth and weakness in the labor markets," he said.

Lereah expects 5.73 million existing-home sales this year, up 2.9 percent from a record 5.57 million sales in 2002. New-home sales should rise 3.1 percent from last year's record to 1.00 million units. At the same time, housing starts are projected to rise 0.5 percent to a total of 1.71 million units.

"Mortgage interest rates appear to have reached bottom and are likely to rise slowly to the range of 5.7 percent for a 30-year fixed-rate by the end of the year," Lereah said.

"With a tight inventory of homes available for sale, home prices will continue to rise above historic norms," he said. The national median existing-home price is projected to rise 6.0 percent this year to $167,800, while the median new-home price should increase 3.8 percent to $194,700.

Growth in the U.S. gross domestic product is expected to pick up steam during the second half of the year, with GDP for all of 2003 pegged at 2.1 percent. Consumer price inflation is forecast to be 2.2 percent in 2003.

Lereah expects the unemployment rate to decline from a current peak to about 6.0 percent in the fourth quarter, while inflation-adjusted disposable personal income is expected to grow 2.7 percent this year. The consumer confidence index should rise to 95 by the end of the year.

Source: National Association of Realtors®