WASHINGTON--(BUSINESS WIRE)--July 6,
2004--Interest rates are rising due to healthy economic growth
and they won't dampen the general strength of the nation's
housing market, according to the National Association of
Realtors(R).
David Lereah, NAR's chief economist, said the
cause of higher interest rates makes all the difference. "The
reason interest rates are higher is that we are in a growing
economy rather than dealing with inflationary pressures," he
said. "This is good news because corporate profits are up 40
percent from two years ago, so companies are spending and jobs
are being created at a strong pace. In the housing markets, this
is largely neutralizing the effects of modestly higher interest
rates."
"In fact, mortgage interest rates will remain
very favorable in historic terms for the foreseeable future. One
concern is for lower-income home buyers who are affected the
most by a rise in financing costs-our hope is that the improving
job market will provide the means to also afford decent housing
at the lower rungs of the housing ladder," Lereah said.
Short-term interest rates are rising slowly, and
long-term rates rose previously in anticipation of the Federal
Reserve Board move last week. The 30-year fixed-rate mortgage
retreated last week to 6.21 percent after reaching the
6.3-percent range in May, but should creep up to 6.7 percent by
the fourth quarter. Unemployment is trending down and is
expected to be 5.2 percent by the beginning of next year.
Lereah forecasts existing-home sales to hit a
record 6.31 million this year, up 3.4 percent from 2003.
New-home sales are expected to rise 6.4 percent to 1.16 million
in 2004, also a record. Housing starts should grow by 2.6
percent to 1.90 million, the highest level since the impact of
the baby boom generation in 1978.
The median existing-home price should rise 6.7
percent this year to $181,500; the median new-home price is seen
at $209,600, up 7.9 percent from 2003.
NAR projects the U.S. gross domestic product to
grow 4.5 percent this year, while the Consumer Price Index
should rise 2.7 percent in 2004.
Inflation-adjusted disposable personal income is
expected to grow by 3.8 percent this year, and the consumer
confidence index will trend up to 101 in the fourth quarter.
