Washington, DC, December 8--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.
