SAN FRANCISCO -- The National Association of Realtors is expecting the fourth best year ever for existing home sales in 2001.

Projections released at NAR's annual convention here earlier this month call for only a slight 0.5 dip in resales, from 5.04 million this year to 5.01 million next year.

But the group is predicting a 5.5 percent decline in new home sales, from 882,000 to 833,000. The slowing economy “will hurt housing most in the higher price ranges,” Chief Economist David Lereah explained.

Overall, though, Mr. Lereah pronounced the housing sector “in relatively good shape” as the Federal Reserve Board continues to ride roughshod over economic growth.

“The economy's like a train, there's a lot of momentum and it would take an unusual combination of events to derail it,” the economist explained. “But with the Fed tapping on the breaks, we're expecting a soft landing in 2001.”

Mr. Lereah said that while any combination of factors could lead to a recession, a major downtown “at this juncture” is not on his or many other economists' radar screens.

“All the different economic indicators have slowed but consumers still have discretionary income to spend, and they are,” he said. “If anything, the Fed will remain in neutral through the winter, and if the economy slows too much after that, it could start easing again later in the year.”

NAR's outlook for mortgage rates is even more positive. After averaging about 8.1 percent for the year, Mr. Lereah thinks loan rates will hold fairly steady next year at the current 7.8 percent “with no significant movement.”

Such stability “should contribute” to level sales activity and help some localities avoid the shortfall of properties for sale that plagued them earlier this year, he added.

Despite the relatively strong prognosis, the economist doesn't believe a 70 percent home ownership rate is in the cards.

“We needed to have a great economic expansion with historically low rates just to get where we are now,” he pointed out, adding that 68 percent may be in the cards but not 70 percent.

Published: November 13, 2000

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