A firming economy and a continuation of historically low mortgage interest rates mean 2003 is likely to be the second-best year on record for the housing market, according to the National Association of REALTORS.

David Lereah, NAR's chief economist, said home sales are at a sustainable pace. "With most of the disruptions of unusual weather and war behind us, home sales should be fairly stable going forward," he said. "The current level of activity is on track with our forecast, which would make this the second-best year ever for home sales."

Lereah said the 30-year fixed mortgage interest rate should move only gradually and rise slowly to 6.3 percent by the end of the year. "This will pinch some buyers at the margins of qualifying for a loan, but will not significantly impact the overall market. We also expect the economy to gain momentum in the second half of the year, brightening the job market and boosting consumer confidence," Lereah said.

NAR projects 5.53 million existing-home sales in 2003, down 0.7 percent from the record of 5.57 million sales last year. New-home sales should total 956,000 units this year, which also would be the second-best on record, down 1.8 percent from 974,000 sales in 2002. Housing starts are seen to total 1.72 million units in 2003, up 0.6 percent from last year.

The national median existing-home price is expected to rise 5.1 percent this year to $166,400, while the median new-home price should rise 3.2 percent this year to $193,500.

Growth in the U.S. gross domestic product is projected to improve during the second half of the year, reaching an annual growth rate of 3.9 percent in the third quarter. Although GDP will average only 2.3 percent for the year, it should rise to 3.5 percent in 2004. Consumer price inflation is likely to be 2.6 percent for this year.

NAR expects inflation-adjusted disposable personal income to grow 2.6 percent in 2003, while the unemployment rate should peak at 6.0 percent in the current quarter and then decline to 5.8 percent end of the year. The consumer confidence index is expected to rise to 90 by the in the fourth quarter.

More detailed information about the association's economic outlook, as well as other analysis of real estate industry statistics, can be found in the May issue of NAR's Real Estate Outlook: Market Trends and Insights. The publication may be purchased by calling 800/874-6500.

Published: May 8, 2003

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