U.S. home sales approach record activity

Fannie Mae economist cites low rates, high demand
Inman News
Price increases should slow some, but leading indicators suggest there will be little change in the record levels of U.S. housing activity this year, Fannie Mae's chief economist said Thursday.

"Home sales are now expected to be little changed from the record levels of last year, although price levels should slow some," said David Berson, chief economist at the mortgage finance company, in his mid-year outlook.

Berson boosted his target for sales of existing homes in 2005 to 6.75 million from an earlier estimate of 6.15 million. Sales of new homes should hit 1.19 million, up from Berson's earlier forecast of 1.09 million. The new targets would be just shy of record existing- and new-home sales last year.

In 2004, existing-home sales totaled 6.78 million while new-home sales hit 1.2 million.

"At the beginning of the year we did not project home sales to be as strong as they've been," Berson said. "I don't know anybody who predicted home sales would be as strong as they have been. They are running at a record pace."

The report said the economy is growing at or slightly above trend, and long-term interest rates dropped sharply again over the past month, before rising as the report was written. Markets continue to expect further, but modest, Fed tightening over the course of 2005, Berson's report said.

Fannie Mae's chief economist on Thursday told reporters that U.S. home sales could hit a fifth consecutive record in 2005 due to low mortgage rates, a growing economy and an increasing number of investors driving demand.

"It's certainly possible that in 2005 we will see a fifth consecutive record year for housing," Berson said during a press conference. "We're within just a whisper of what a record number would be."