Greater than expected sales of existing homes in the first seven months of the year will help set a record for annual existing-home sales in 2004, according to the National Association of Realtors®. Existing-home sales will increase about 6.5 percent this year to 6.50 million.*

New-home sales also are expected to rise to a record level this year, to 1.16 million, up 7.1 percent. Housing starts are forecast to increase 4.8 percent to 1.94 million in 2004, the strongest pace since 1978 when baby boomers were entering the market en masse.

David Lereah, NAR's chief economist, said a continued decline in mortgage interest rates is creating favorable market conditions at a time when household formation is rising. Though NAR projects the 30-year fixed-rate mortgage to slowly rise to 6.0 percent in the fourth quarter, the average rate for the entire year should be 5.9 percent, the second-lowest annual average since the mid 1960s. The lowest rate in recent years was 5.8 percent in 2003.

"Price appreciation is projected to be only slightly higher than historic norms next year, as supply levels come closer to market demand. Although we expect the number of home buyers to continue to exceed the number of sellers, the situation should improve in 2005," Lereah said.

The national median existing-home price for all of 2004 is expected to rise 7.5 percent to $182,700. At the same time, the median new-home price will grow by 8.9 percent to $212,300. "Home prices will continue to rise above historic norms as long as we have tight inventories of homes available for sale," Lereah said.

He expects the U.S. gross domestic product to grow 4.5 percent this year, while the Consumer Price Index should rise by 2.7 percent. The unemployment rate is projected to drop to 5.2 percent in the fourth quarter.

Inflation-adjusted disposable personal income is forecast to increase 2.9 percent in 2004, while the consumer confidence index should trend up to 105 by the fourth quarter. More detailed information about NAR's economic outlook, as well as other analysis of real estate industry statistics, can be found in the September issue of NAR's Real Estate Outlook: Market Trends and Insights. The publication may be purchased by calling 800/874-6500.

*Following availability of revisions by the U.S. Census Bureau to some statistical data, NAR will make benchmark revisions to both annual existing-home sales totals and monthly seasonally adjusted annual sales rates going back to 1989. Although the data will change, the overall characterization of the market in terms of historic comparisons and relative changes will be consistent with previously reported data. NAR's benchmark approach has been reviewed by the U.S. Federal Reserve Board and will be published with an upcoming existing-home sales news release on September 24 or October 25.

Published: October 6, 2004

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