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NAHB Predicts Growing Housing Industry
Apr 26, 2004
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Housing analysts at the National Association of Home Builders, (NAHB) Construction Forecast Conference said that even if the Federal Reserve Board begins raising interest rates, the housing industry is moving into a healthier economic environment where job growth and income gains will keep residential construction and sales at healthy levels and buoy house values as well.

NAHB chief economist David Seiders expects that the federal funds rate, which is currently 1 percent, will begin to rise in August 2004 and increase gradually to about 3 percent by the end of 2005. That would boost the prime interest rate, he said, but in terms of the availability and cost of loans the industry is heading into a very favorable financing environment.

According to Mr. Seiders, mortgage interest rates, which in the past several weeks have climbed to the 6 percent level, are not expected to rise to more than 6.25 percent by the end of this year and 7 percent by the end of 2005.

Mr. Seiders also indicated that the industry doesn't need to worry about a housing price bubble precipitated by the upward direction of mortgage rates. "We're already past a contraction in payroll employment, and jobs and income are in a growth mode," he said, "so prices won't contract because the real economy is coming on strongly."

According to NAHB's forecast, single-family housing starts are expected to remain at high levels, declining slightly from 1.5 million units last year to 1.5 million in 2004 and 1.4 in 2005. Bolstered by growing strength in the condominium market, this year's multi-family construction is forecast to remain at 2003's 348,000-unit level, with a small drop to 320,000 units in 2005.

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