WASHINGTON (December 2, 2003) – Bolstered by three consecutive record years, home sales will continue to provide a strong foundation for the U.S. economy while other sectors improve in 2004, according to the National Association of Realtors®.

David Lereah, NAR's chief economist, said the fundamentals responsible for this year's housing record will be in play next year as well. "Home sales will be off mildly for the second best showing ever in 2004," he said. "With the economy improving, consumer confidence rising and jobs being created, a growing number of households will sustain strong housing demand. Only a modest rise in mortgage interest rates will slightly dampen the pace of home sales next year."

Lereah said growth in the U.S. gross domestic product will be 3.1 percent for 2003 before growing another 4.8 percent in 2004. "With improvements in manufacturing and other sectors, the job market is beginning to pick up steam and the economy is running on all cylinders," he said. "We expect 2 million jobs to be created over the next year, helping to push the unemployment rate down to 5.6 percent by the fourth quarter of 2004."

NAR expects a record of 6.07 million existing-home sales for 2003, up 9.1 percent from last year's record of 5.57 million sales. New-home sales this year will grow by 9.7 percent to a record of 1.07 million units, while housing starts should rise 6.1 percent to a total of 1.81 million units this year, the highest since 1978.

"Next year we're expecting 5.81 million existing-home sales and 1.02 million new-home sales, which would be the second best year for each series," Lereah said. Housing starts for 2004 are projected at 1.72 million.

The national median existing-home price for 2003 will rise 9.1 percent to $172,600, which is the strongest increase since 1980, and the median new-home price should grow by 3.6 percent to $194,400. Median price increases in 2004 are forecast at 4.7 percent for existing homes and 5.1 percent for new homes.

"Although the rate of price increase is expected to slow next year, it will remain above the historic norm of one-to-two percentage points higher than the general rate of inflation," Lereah said. He projects the consumer price index to increase only 1.5 percent in 2004, following a 2.3 percent rise this year.

The 30-year fixed-rate mortgage is projected to average only 6.4 percent in 2004, up modestly from an average of 5.8 percent this year – the lowest in four decades. "With tame inflation, mortgage interest rates are staying at very low levels much longer than many people expected. This is extending the period of favorable housing market conditions and sustaining historically strong sales activity," Lereah said.

Inflation-adjusted disposable personal income is seen to grow 2.5 percent for 2003 and another 4.6 percent next year, while the consumer confidence index should rise gradually to 101 by the fourth quarter of 2004.

More detailed information about the association's economic outlook, as well as other analysis of real estate industry statistics, can be found in the December issue of NAR's Real Estate Outlook: Market Trends and Insights. The publication may be purchased by calling 800/874-6500.

The National Association of Realtors®, "The Voice for Real Estate," is America's largest trade association, representing more than 972,000 members involved in all aspects of the residential and commercial real estate industries.