SO MUCH FOR A SLOWDOWN. THE Federal Reserve has followed through on its much-anticipated increases of the Federal Funds rate, which now stands at 1.5 percent. Economists expected the rate hikes to trigger increases in mortgage rates, but the economy's “soft patch” has held 30-year fixed rates in check at under 6 percent. “Mortgage rates appear stubbornly resistant to moving upwards,” says Lawrence Yun, senior economist for the National Association of Realtors (NAR).

That stubbornness means good news for the housing industry. Starts have rebounded, and new-home sales are expected to set a record despite a slight dip in June. NAR revised its 2004 forecast for existing-home sales, bumping it up to 6.45 million homes from 6.31 million—350,000 above 2003's record.

“These are surprisingly strong numbers, higher than we'd anticipated,” Yun says in explanation of NAR's revised projection. “The soft patch is actually providing a window of opportunity for people who are timing their home purchase.” Beyond the soft patch, he says, job growth should continue to bolster the industry.

But Yun and his counterparts caution against the notion that housing can continue at this breakneck pace indefinitely. A slight cooldown is on the way, they say, and 2005 probably won't be another record-breaking year. Mortgage rates will rise, likely to about 6.4 percent by December, Yun says, and NAR has forecasted about 6.08 million existing-home sales for 2005. The NAHB also predicts about a 5 percent drop next year.

In the meantime, NAR's second quarter survey of sales in 128 metropolitan areas proves how hot some parts of the market are. The group reported double-digit annual increases in median existing-home prices in 49 metros, the largest number ever to post those kinds of gains, according to David Lereah, NAR's chief economist.

The survey showed that there's no hotter place than Las Vegas right now. The median existing-home price in the second quarter for the city and its surrounding metro area hit $269,900, up a full 52.4 percent over the same period in 2003, and the rate of sales leapt 32.5 percent.

The previous increase in year-over-year sales price was about 38 percent, says Walter Molony, an NAR spokesperson. The figure was so impressive, Molony says, that NAR took its calculations a step further to find that Las Vegas had only a 1.7-month supply of homes during the quarter, compared with a 4.2-month supply nationwide.