WASHINGTON (Inman News Features) - The nation's housing market is expected to soften ever so slightly this year, but still post exceptionally strong sales activity as the economy rebounds from a shallow recession, according to the National Association of Realtors' latest economic and housing forecast. NAR Chief Economist Dr. David Lereah said the forecast anticipates a "negligible" 0.5 percent decline in national existing-home sales to 5.23 million units this year compared with 2001's results.
But new home sales are expected to decline 3.2 percent to 874,000 units and housing starts are expected to decline 4 percent to 1.54 million year-over-year this year.
Median prices for existing and new homes sold are expected to increase 4 percent to $152,400 and 4.7 percent to $179,200, respectively, this year.
And interest rates on 30-year fixed-rate mortgages are expected to move higher, reaching 7.3 percent in the third quarter'a level still low on a historical basis.
The interest rate spread has been widening between fixed-rate and adjustable-rate mortgages and Lereah said that might make adjustable-rate loan products more attractive to first-time home buyers, especially in markets with high housing costs.
NAR's 2002 forecast expects the nation's economic recession to conclude in the second quarter with a 1.9 percent rise in the gross domestic product, a measure of U.S. economic growth.
Unemployment is expected to rise to 6.1 percent before easing in the fourth quarter while inflation-adjusted disposable personal income is forecast to grow 2.1 percent and consumer price inflation is expected to be only 1.8 percent this year, according to the forecast.
"Much of our economic activity is being sustained by the strong housing market, which will lead us out of the shallow recession which began last spring," Lereah said.
The final figures for 2001's housing markets have yet to be tabulated, but NAR's evidence thus far indicates sales of existing and new home set records last year.
Lereah said housing last year outperformed many analyst's expectations.
"Except for the uncertainty cast by the fallout of Sept. 11, our outlook for the housing market grew brighter as the year progressed," Lereah said. "When we get the December data later this month, we expect to see total existing-home sales for 2001 to be 5.25 million, up 2.5 percent from 2000 and surpassing the previous record of 5.21 million set in 1999."
NAR's initial 2001 forecast released a year ago called for existing home sales of 4.94 million, which would have been a 1.1 percent decline compared with 2000's housing market.
At that time, the association was predicting a soft landing for the economy, but Lereah was waiving a yellow caution flag and saying the Federal Reserve would need to cut interest rates to avoid an economic hard landing. That observation proved on-point as the Fed lowered interest rates multiple times last year.
New-home sales are expected to show a final figure of 902,000 units last year, an increase of 2.5 percent compared with 2000's figure and surpassing the previous record of 885,000 homes sold in 1998. Housing starts for 2001 are expected to have numbered 1.6 million, a 1.7 percent increase compared with 2000.
National median sale prices for existing and new homes sold are expected to have been $146,000, an increase of 5.5 percent, and $171,200, an increase of 1.3 percent, respectively, in 2001 compared with 2000.
"The median new-home price for 2001 is depressed because we saw a pullback from the upper end of the market, but we expect this to improve this year as the economy recovers," Lereah said.