Low mortgage rates, high demand for housing predicted


July 14, 2002

Two housing economists expect mortgage rates to remain historically low and a high demand for housing to continue based on the nation's sluggish economy and the Federal Reserve's monetary policy.

David Lereah, chief economist for the National Association of Realtors, and Frank Nothaft, chief economist for Freddie Mac, made their predictions for the remainder of the year in forecasts last week.

"Since the economy hasn't established a clear growth path, the Federal Reserve is unlikely to take any action on interest rates in the short term," Lereah said, adding that he expects the economy to gain momentum based on the strong housing market.

Nothaft expects the 30-year, fixed-rate mortgage to average 6.8 percent, the lowest annual average since 1967.

Lereah said NAR expects overall existing home sales this year to climb 3.7 percent to 5.49 million units, higher than last year's record 5.3 million.

Likewise, Nothaft predicts that new-home sales nationally will exceed those in 2001 by 3 percent and that house price appreciation will average 5.5 percent this year but slow to 4.5 percent next year.

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