U.S. Housing Performance Predicted to Remain Strong
Mar 25, 2004
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According to the National Association of Home Builders (NAHB), economists believe the U.S. housing industry will continue to perform well during 2004 and beyond despite concerns over a housing pricing bubble.
According to experts, rising household incomes and low interest rates accompanying the lowest levels of inflation in 4 decades have produced a solid foundation for the housing industry, which can be expected to continue for the next few years.
"Gains in new home prices for last year are similar to the previous years," said Jim Glassman, senior economist for JP Morgan Chase. "There is nothing going on to suggest that home prices are straining or getting out there. We're seeing that when we do better, when incomes are up and when it's cheaper to finance, people want more housing."
NAHB chief economist David Seiders predicted that there will be some upward momentum in mortgage rates throughout 2004, but noted that those rates so far have been lower than expected, with 30-year, fixed-rate mortgages averaging below 5.4 percent. Mr. Seiders anticipates that mortgage rates likely will average 5.6 percent in the current quarter and rise to 6.1 percent by the end of the year, accompanied by a slight decline in both starts and sales activity and a five percent gain in home prices.
According to David Crowe, NAHB's senior vice president of Federal Regulatory and Housing Policy, while house price appreciation has been good news for the nation's home owners and the economy, it has proved challenging for municipal employees and others who can't afford to live in the communities where they work.
Among the solutions are a homeownership tax credit, no-down payment loans insured by the Federal Housing Administration, and the removal of regulatory barriers imposed on new developments, Mr. Crowe said.
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