Housing Market To End Year on Strong Note
WASHINGTON (December 7, 2004) – Stronger than expected home sales and higher median prices have caused the National Association of Realtors® to revise upward its year-end forecast. Existing-home sales are expected to jump 7.9 percent to 6.58 million* in 2004, well above last year’s record. For 2005, NAR projects 6.38 million sales, which would be the second highest level on record.
The national median existing-home price is projected to rise 7.9 percent to $182,500 for the year. The median new-home price should increase 8.9 percent to $214,600.
New-home sales will rise 8.9 percent to 1.18 million this year and 1.13 million are forecast for 2005, just shy of the record expected this year. Housing starts are seen at 1.95 million this year, the highest level since 1978; housing construction is projected at 1.87 million units in 2005.
David Lereah, NAR’s chief economist, said that some of the backup in housing demand is being met. “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,” Lereah said. “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.”
Lereah predicts the 30-year fixed-rate mortgage should rise slowly but average only 6.4 percent next year.
In 2005, Lereah expects the median existing-home price to rise 5.0 percent and the typical new home price to grow by 5.8 percent. “The slowing rate of price growth will be good news for first-time buyers, but since inflation is expected to remain modest, home prices will still be rising a little faster than the historic norm of 1-to-2 percentage points above the rate of inflation,” Lereah said.
NAR forecasts tame inflation with the Consumer Price Index rising 2.7 percent this year and 2.1 percent in 2005. The U.S. gross domestic product should grow by 4.4 percent for all of 2004 and another 4.0 percent next year. The unemployment rate is projected to decline to 5.1 percent by the second half of next year.
Inflation-adjusted disposable personal income is forecast to increase 3.1 percent this year and 3.9 percent in 2005, while the consumer confidence index should rise to 105 in 2005.
More detailed information about NAR’s economic outlook, as well as other analysis of real estate industry statistics, can be found in the December 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.
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NOTE: Following availability of revisions by the U.S. Census Bureau to some statistical data, and feedback from the U.S. Federal Reserve Board, NAR will make benchmark revisions to both annual existing-home sales totals and monthly seasonally adjusted annual sales rates. Although the data will change, the overall characterization of the resale market in terms of historic comparisons and relative changes will be fairly consistent with previously reported data.
The changes will include addition of existing condominium and cooperative sales to the monthly series, with monthly revisions going back to 1999. Data prior to 1999 will not be directly comparable due to the benchmark break. The separate quarterly track of existing condo/co-op sales will be discontinued, although the new monthly data will show that segment’s market share.
