By Jill Ralph. Analysts have been busy reworking their 2003 forecasts following the late inning surge in 2002 new home starts and record sales of existing homes and comparably strong figures in January. Stronger-than-expected output boosted single-unit home starts to a total of 1.36 million new single-family homes in 2002, more than in any year since 1978, according to year-end U.S. Commerce Department figures.
While no one expects 2003 to match 2002 starts, most of the major housing forecasters revised their January projections upward for first-and second-quarter single-family home start projections. Most also listed more moderate increases in key interest rate measures moving into 2004. At the same time, analysts' figures appeared more conservative about the pace of 2004's housing starts, revising output downward slightly in most instances.
National Association of Realtors chief economist David Lereah was typical, if among the more aggressive, beefing up his first quarter single-family start projections by 5 percent, to a seasonally adjusted annual rate of 1.38 million and his 2003 estimate by 2 percent, to 1.36 million. However, Lereah reduced his forecast in 2004 for single-family starts by one percent, to 1.32 million units, anticipating a stronger economy pushing interest rates higher.
Frank E. Nothaft, chief economist for Freddie Mac, says he expects low interest rates to continue to fuel the refinance boom, supporting the housing market, and a broader second half recovery. Fannie Mae chief economist, David Berson, also sees a slightly stronger housing sector in the first half, despite weak, but not deteriorating labor markets.
NAHB chief economist David F. Seiders expected a strong housing market to lead a struggling economy coming into the year. He anticipates "a package resembling" the Bush Administration's stimulus plan to be hashed out by Memorial Day, giving the economy added strength going into 2004. But he warned of possible longer-term problems including higher interest rates, devaluation of the mortgage interest, and property tax deductions from lower marginal tax rates. Overall, however, 2003 will look a lot like 2002 for home builders in spite of a sluggish recovery.