Estimate of 2003 price rise lowered

Drop from 9.1% to 8% blamed on increase in mortgage rates

January 11, 2004|By BLOOMBERG NEWS

The National Association of Realtors lowered its estimate for last year's house-price appreciation to 8 percent from 9.1 percent last week, as higher mortgage rates slowed sales.

The median price for a previously owned home probably will be $170,800, up from $158,100 in 2002, the Washington-based trade group said. That would be the biggest yearly gain since 1980, when prices rose 12 percent to $62,200, according to Frederick Heller, the association's research librarian. A month ago, the group had forecast a median price of $172,600 for last year.

Real estate sales and price appreciation slowed in the final months of last year after mortgage rates rose almost 1 percentage point from a 45-year low in June. In November, sales of previously owned homes fell 4.6 percent from the prior month and the price of a home fell 0.5 percent, the association has reported.

"The housing sector is very sensitive to mortgage rates because it changes the amount of income you need to purchase a home," Lawrence Yun, an association economist, said. "When borrowing costs are higher, people can't afford to bid as much because they can't afford the monthly payment."

The average rate for a 30-year fixed mortgage rose to 6.44 percent in September, the highest for last year, after falling to 5.21 percent in June, the lowest since 1958, according to Freddie Mac. Last week, the rate was 5.87 percent, the No. 2 U.S. mortgage buyer said.

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