A SPRINGTIME DIP IN MORTGAGE RATES, long-awaited job growth, and record May housing sales have spurred four chief economists to bump up their 2004 forecasts for total new home starts. In their mid-year weigh-ins, Freddie Mac's Frank Nothaft, Fannie Mae's David Berson, the National Association of Realtors' David Lereah, and the NAHB's David Seiders all edged up their estimates for total home starts for the year, with Seiders making the rosiest prediction: 1.927 million starts.
Last spring, notes Berson, “We saw rates going to almost where they were at their lows of last year.” Meanwhile, the job market began to pick up steam. “At the beginning of the year, the labor market was still quite dismal,” says Nothaft. “That has totally turned around over the past six months. If you look at the period from March to June, the economy has created more than a million jobs.”
Meanwhile, new home sales increased in May by nearly 15 percent, according to the Commerce Department, to a record annual rate of 1.37 million units. Counterbalancing the healthier job market, Nothaft says, are expectations that the Federal Reserve will raise rates once—and possibly twice—before the end of the year, following its quarter-point increase in late June.