With solid economic and housing market fundamentals continuing in 2002, the
pace of home sales is expected to remain close to historic highs, according to
the National Association of Realtors.
David Lereah, NAR's chief economist, said the strength of the housing market
– which surprised many analysts last year – is not about to lose momentum. "All
of the positive factors that contributed to record home sales in 2001 will be
at play again this year – the fundamentals of the market will not change soon,"
he said. "Mortgage interest rates will remain historically low, most people
will continue to have good jobs and new households are still being created with
our growing population – these are families that have a high desire for the
American dream of homeownership."
Lereah said existing-home sales are expected to be the second highest on
record, slipping 1.1 percent this year to a total of 5.20 million units.
New-home sales, which also set a record last year, will decline 3.0 percent in
2002 to a total of 874,000 units. He forecasts housing starts to drop 3.7
percent to a total of 1.54 million units this year.
Home sales performance should vary during the year. "Weaker labor market
conditions will have a mild dampening effect on home sales in the first half of
the year, but as job creation accelerates in the second half of the year and
consumer confidence strengthens, we'll see somewhat stronger levels of home
sales," Lereah explained. "The 30-year fixed mortgage interest rate will
increase gradually as the economy improves, reaching 7.3 percent by third
quarter, but not enough to create any significant affordability problems, given
the fact that interest rates are still so low in historical terms."
With relatively low housing inventory conditions prevailing in many areas this
year, the association forecasts the national median existing-home price will
rise 4.5 percent in 2002 to $154,200. The typical new home price is expected to
be $183,100 this year, up 5.2 percent from 2001.
Lereah forecasts U.S. economic growth, as measured by the Gross Domestic
Product (GDP), to rise at a healthy rate in the spring and reach a 3.5 percent
annual growth rate in the third quarter. Consumer price inflation for this year
will be only 1.7 percent.
NAR expects the unemployment rate to peak at 6.1 percent in the second quarter
before easing in the second half of the year, while inflation-adjusted
disposable personal income should grow 2.3 percent in 2002.
Published: February 7, 2002
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