BEND, Ore. (CNN/Money) Ė What's in the cards for the housing market in 2004?
At a press briefing on Thursday, the Mortgage Bankers Association (MBA) said strong demographics, a strengthening job market and only modest increases in interest rates bode well for the housing market in 2004 and beyond.
|Year†||Unemploy-ment rate†||30-year fixed rate†||Median home price†|
|†Source:††Mortgage Bankers Association|
"We see housing as being strong over the next three years within a strong economy," said Douglas Duncan, chief economist for the MBA, the national association representing the real estate finance industry.
The association said it expects the unemployment rate to decline from its current level of 5.7 percent to 5.2 percent by the middle of 2006. Real gross domestic product, it forecasts, will average 4.7 percent in 2004, up from 3.1 percent in 2003.
Moreover, it expects interest rates to stay low. In 2003, the 30-year fixed rate mortgage averaged 5.8 percent. That average, according to MBA forecasts, will increase to 6.1 percent in 2004, 6.7 percent in 2005 and 7.3 percent in 2006.
"These are very modest interest rate increases for the level of economic growth we are expecting," said Duncan.
Although sales of existing homes are expected to decline about 5 percent in 2004 and 3.6 percent in 2005, the median price for existing homes should continue to tick up, the MBA thinks. In 2003, the median home price was $170,000. The MBA projects a median of $179,000 in 2004 and $186,000 in 2005.
"Supply will grow less rapidly than demand and that will support housing prices," said Duncan, explaining that at the same time supply is constrained by the cost and time it takes to develop new housing, baby boomers and the immigrant population continue to drive demand.
"The baby boomers aren't done buying," said Duncan.