New York (CNN/Money) -
The housing market has been the belle of the economic ball over the past few years.
And, according to a report released today by the Mortgage Bankers Association of America, this will be another record-breaking year for home sales. An unprecedented 6.8 million homes are expected to be sold in 2003. That's a 4.4 percent increase over 2002, itself a record year.
But MBAA chief economist Douglas Duncan and his team of forecasters say the housing market is finally showing signs of fatigue. Though it's not expected to plummet, there's no question the market will be dancing to a slightly slower beat in the coming years.
Housing, said Duncan, has "carried more than its weight for the last three to four years." Over the next few years, the economic focus will gradually move over and let other sectors of the economy -- travel and recreation among them -- share some of the spotlight, he said.
With low interest rates prompting would-be homebuyers to get their buying out of the way now (see "Mad Dash to Buy"), the number of homes sold is expected to drop to 6.56 million next year and 6.4 million in 2005.
That said, the MBAA believes that because demand will continue to outpace supply, prices will keep rising, although at a slower rate. The median price for existing homes is expected to increase 5.4 percent this year to $166,200. The MBAA expects that number to increase 4.7 percent in 2004 and 4.4 percent in 2005.
Interest rates to rise
Although interest rates will steadily work their way up, no drastic increase is in the cards. The 30-year fixed-rate mortgage, now at 5.7 percent, is expected to go to 6.1 percent by the fourth quarter of 2004 and 6.7 percent by the fourth quarter of 2005.
Increased competition among lenders may be one factor in borrowers' favor. If demand for new mortgages and refinancing drops 43 percent next year, as the MBAA is predicting, lenders will need to compete more aggressively for new business.
That means borrowers should be in a better position to negotiate for the best deal available, both for interest rates and closing costs.