David Lereah, NAR's chief economist, said final figures for existing-home sales will total almost 6.07 million in 2003, up 9.1 percent from the previous record of 5.57 million in 2002. "Existing-home sales should come in at about 5.85 million in 2004, still the second-best on record," he said. "We'll see a similar pattern this year for new homes with 1.01 million sales, off from a record of about 1.08 million for 2003." He expects housing starts to total 1.84 million units for 2003, the best performance since 1978, with 1.71 million units projected for this year.

Lereah said growth in the U.S. gross domestic product (GDP) is forecast at 4.7 percent for 2004. "The biggest turnaround in 2004 likely will be in the manufacturing sector, with business spending and job creation picking up steam – that will help to bring the unemployment rate down to 5.4 percent by the end of the year." He expects GDP to grow another 4.0 percent in 2005.

The 30-year fixed-rate mortgage is projected to average 6.5 percent in 2004, up from a generational low of 5.8 percent in 2003. "On the heels of three consecutive record years for home sales, the up tick in mortgage interest rates will offset some of the benefits of an improving economy," Lereah said. "However, the impact will be fairly minimal because the fundamental conditions for a strong housing market remain – a growing number of households, an improving job market and generally good affordability conditions."

The national median existing-home price for all of 2003 rose about 8.0 percent to $170,800, while the median new-home price is expected to be up 3.7 percent to $194,500. The median existing-home price is forecast to grow by 4.6 percent in 2004, while new homes should increase by 5.1 percent.

NAR expects tame inflation with the consumer price index projected to increase a modest 1.6 percent in 2004. Inflation-adjusted disposable personal income is forecast to grow 4.6 percent this year, while the consumer confidence index should rise gradually to 98 by the fourth quarter.