December Roundup: Home Sales Soar, Free Land In Midwest, Efficient Homes Cool Heating Costs
by Broderick Perkins
2004-2005 Home Sales Remain Bullish The National Association of Realtors revised upward its year-end forecast for home sales and the trade group projects the healthy housing market will stay alive in 2005. By the end of 2004, existing-home sales should be up 7.9 percent to 6.58 million, easily surpassing 2003's record. In 2005, NAR projects 6.38 million sales, the second highest level in history. The median price on existing homes will rise 7.9 percent to $182,500 in 2004 and another 5 percent in 2005. New-home sales are expected to rise 8.9 percent to a record 1.18 million in 2004, but only 1.13 million in 2005. New-home prices should be up 8.9 percent to $214,600 in 2004 and another 5.8 percent in 2005. "We're setting our fourth consecutive record year for existing-home sales, and even with strong fundamentals such as household growth, low interest rates and an improving economy, we simply can't set records every year," said David Lereah, NAR's chief economist. "Given the sharp rise over last year's record, a lot of buyers have found the home they've been looking for and we can expect a bit of a breather in 2005, which will remain a historically strong year," as builders work to ease the backup in housing demand, he added. 2004-2005 Mortgage Interest Rates Remain Affordable Mortgage interest rates are ending the year just about where there were when 2004 began -- hovering below the very affordable 6 percent mark. Freddie Mac's Weekly Mortgage Market Survey put the average fixed interest rate for 30-year conforming loans at 5.87 percent on Jan. 8, 2004, in the year's first weekly survey. On Dec. 22, rates had bounced up a bit from the previous week, but only to 5.75 percent. Fifteen-year loans were in a dead heat averaging 5.17 percent in January and 5.18 percent by Dec. 22. One-year, adjustable-rate mortgages (ARMs) were showing more strain from Federal Reserve rate hikes and on Dec. 22 were at 4.17 percent, compared to 2004's first reported ARM average, 3.76 percent. Still, rates will finish 2004 well off the 6.75 rate originally forecast. Rates should trend up in 2005, but, based on year-end performance, at a slower pace that previously expected, according to industry leaders who attended the Annual Mortgage Bankers Association conference in San Francisco, CA's Moscone Center in late 2004. Slower economic growth in 2005 should hold average mortgage rates to 6.5 percent or lower throughout 2005, according to a mortgage trade group's forecast. The National Association of Realtors recently forecast only a 6.4 percent ceiling. The Midwest's New Homestead Act A surplus of land and a shortage of residents is prompting some Midwestern communities to give away parcels of dirt, recalling the government land giveaways of the Homestead Act, repealed in 1976. You'll have to withdraw from Starbucks and the mega-mall down the highway, but to reverse decades of population declines and to pad the tax base, not only are Heartland communities giving away land, but they are also giving down payment assistance, tax rebates, breaks for small business and even the promise of high-speed Internet access. The new KansasFreeLand.com website links potential buyers to programs offered by the towns of Ellsworth, Marquette, Minneapolis, KS and others in the Breadbasket state. In North Dakota, even ghost towns are on the roster of dozens of small towns giving away land and incentives in six counties listed on the Prairie Opportunity website. Efficient Homes Offset Energy Costs Freddie Mac analyzed data from the American Housing Survey (AHS) and found that fuel cost as a percentage of home value was about 0.8 percent between 2000 and 2003, versus about 1.8 percent before 1960 and an average of 1.3 percent in the oil crisis decade of the 1970s. While some of the cost difference can be attributed to home value appreciation, Freddie Mac says much of it is due to recently built homes that are about twice as energy efficient as homes built in the 1960s. Crude oil pulled back from a peak of $55.23 per barrel in October, but remains far off the $30 a barrel mark of a year ago. | 
