WASHINGTON (March 14, 2005) -- Both new- and existing-home sales will remain historically strong this year while the pace of price appreciation should ease, according to the National Association of Realtors®
Sales of existing-homes, including single-family, condo, and co-op, are expected to decline 3.2 percent to a total of 6.57 million* in 2005 from a record 6.78 million last year. New-home sales are seen at 1.13 million this year, 5.9 percent below a record of 1.20 million in 2004; the projections for both new- and existing-home sales in 2005 would be the second best on record. Housing starts are forecast to slip 0.7 percent to 1.94 million units in 2005.
David Lereah, NAR's chief economist, said home sales are starting to ease to more sustainable levels. "After setting four consecutive record years, the housing market is due for a breather," he said. "As mortgage interest rates creep up and home sales slow a bit, we should see a better balance between home buyers and sellers -- that will take some of the pressure off of home prices."
Lereah expects the 30-year fixed-rate mortgage to gradually increase to 6.7 percent by the end of the year; for all of 2005 the rate should average 6.2 percent.
The national median existing-home price for all housing types should grow 5.6 percent this year to $195,500. The median new-home price is expected to rise 3.9 percent in 2005 to $228,300. Appreciation last year was 9.3 percent for all existing homes, and 12.6 percent for new homes.
"In January we set a record low for the supply of existing homes available for sale," said Al Mansell, NAR president and CEO of Coldwell Banker Residential Brokerage in Salt Lake City. "Until the market gets closer to equilibrium between home buyers and sellers, prices will continue to rise faster than normal." Typically, home prices rise at the rate of inflation plus 1 to 2 percentage points.
Inflation should stay modest with the Consumer Price Index rising 2.6 percent in 2005. The U.S. gross domestic product is expected to grow 4.0 percent this year, while the unemployment rate should average 5.1 percent.
Inflation-adjusted disposable personal income is forecast to grow 3.8 percent in 2005, while the consumer confidence index should rise to 107 during the second half the year.
More detailed information about NAR's economic outlook, as well as other analysis of real estate industry statistics, can be found in the March 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 1 million members involved in all aspects of the residential and commercial real estate industries.
*This is the first forecast for total existing-home sales, including single-family, townhome, condominium, and cooperative homes. Prior to benchmark revisions released February 25, the forecast was for single-family homes only.
The next existing-home sales release will be March 23, the Pending Home Sales Index is scheduled for April 4 and the next forecast will be April 12.