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Professional Real Estate Advice July 22, 2004

John Puhek
Owner Broker/RE/MAX Professionals


Home Sales Will Be Near Record Despite Higher Interest Rates

Home Sales Will Be Near Record Despite Higher Interest Rates


Economic growth is expected to remain above historic averages over the next two years, stimulating job growth and sustaining home sales despite higher interest rates, according to the National Association of Realtors.


David Lereah, NAR’s chief economist, said home sales will be strongest during the first half of the year.  “With mortgage interest rates bottoming out in March, we’ve had a big rush of home buyers this year,” he said.  “Home sales should hold close to record territory for a couple months, then ease in the second half of the year but remain at historically strong levels.”


The 30-year fixed-rate mortgage is expected to rise gradually to 6.6 percent by the fourth quarter.


Existing-home sales are projected to reach 6.00 million in 2004, just 1.6 percent shy of the record 6.10 million last year.  New-home sales should come in at 1.07 million, only 1/2 percent below last year’s record.  Housing starts are forecast at 1.84 million in 2004, slightly below the 1.85 million posted last year.


The median existing home price is projected to increase 4.7 percent this year to $178,100, while the median new-home prices should rise 5.1 percent to $205,000.  (These are obviously national figures an do not reflect the higher real estate values in San Diego County).

Lereah said the U.S. gross domestic product is forecast to grow 4.7 percent this year and 4.3 percent in 2005, both above the historic average of about 3.2 percent.  “These strong growth figures are supported by some pent-up business spending this year, and a reduction in the trade deficit is expected next year,” he said.  “That is stimulating job growth, so the unemployment rate should drop to 5.4 percent by the end of the year.”


The consumer price index is forecast to rise 2.0 percent this year, with a rise in core inflation and additional pressure from job growth.  Inflation adjusted disposable personal income should grow by 3.6 percent in 2004, while the consumer confidence index is expected to rise to 99 in the fourth quarter.