Lower-than-projected mortgage interest rates are expected to sustain housing at healthy levels, according to the National Association of REALTORS.
David Lereah, NAR's chief economist, said mortgage interest rates have moved lower than most forecasters expected. "The silver lining in the cloud of economic uncertainty is historically low mortgage interest rates," he said. "The 30-year fixed mortgage interest rate dipped under 6.0 percent at the end of September to a 40-year low."
"To a great extent, lower interest rates are offsetting the effects of uncertainty over the economy and international events," Lereah said. NAR forecasts existing-home sales to rise 3.2 percent for all of 2002 to a record of 5.47 million units, followed by a historically strong 5.28 million sales in 2003. "Back in January, we were only expecting 5.25 million existing-home sales in 2002. Although there was a surge of sales activity during the first five months of this year, we've settled down to a very sustainable and historically strong pace for the foreseeable future."
New-home sales are projected to rise 2.2 percent to a record of 929,000 units in 2002, with 907,000 sales next year. Housing starts should rise 3.1 percent to a total of 1.65 million units this year, with the same level of activity expected in 2003.
Lereah said the national median existing-home price this year is pegged at $157,800, up 6.8 percent from 2001; it should rise 4.1 percent in 2003, which would mark a return to a normal appreciation pattern as the market comes into a better balance between buyers and sellers. The typical new-home price is projected to be $183,700 in 2002, an increase of 4.9 percent from last year. A similar rise is seen in 2003.
The association projects growth in the U.S. gross domestic product to average 2.4 percent for all of this year and 3.1 percent in 2003. Consumer price inflation should be a negligible 1.6 percent in 2002, with CPI expected at 2.3 percent in 2003.
NAR forecasts the unemployment rate to trend downward to 5.3 percent by the third quarter of 2003. Inflation-adjusted disposable personal income is forecast to grow 4.4 percent in 2002 and 3.5 percent next year.