Prices of U.S. homes to increase 6.1% in '04, Fannie Mae says


August 22, 2004

Fannie Mae said U.S. home prices will rise 6.1 percent this year, a pace the largest U.S. mortgage financier called "unsustainable."

The median U.S. price for an existing single-family house probably will increase to $180,000 from $169,700 last year, Fannie Mae said last week. A month ago, the federally chartered company estimated a 5.3 percent gain in the median price, the point at which half of U.S. homes sell for more and half for less.

Mortgage rates have fallen on signs job creation has slowed. Lower rates make it possible for people to pay more for a home because borrowing costs are less. The average U.S. fixed mortgage rate likely will be 6 percent this year, said David Berson, Fannie Mae's chief economist.

The median price for an existing home probably will be $186,700 next year, a 3.7 percent gain, as the average fixed rate rises to 6.7 percent, Berson said.

- Bloomberg News

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