Even if the Federal Reserve Board begins raising interest rates, the housing industry is moving into a healthier economic environment where job growth and income gains will keep residential construction and sales at healthy levels and buoy house values as well, according to an analysis by the National Association of Home Builders (NAHB).
NAHB Chief Economist David Seiders projects that the federal funds rate, which is currently 1 percent, will begin to rise in August and increase gradually to about three percent by the end of 2005. Mortgage interest rates, which in the past several weeks have climbed to the 6 percent level, will likely rise to no more than 6.25 percent by the end of this year and 7 percent by the end of 2005, he said.
"We're already past a contraction in payroll employment, and jobs and income are in a growth mode," he said, "so [housing] prices won't contract because the real economy is coming on strongly."
Single-family housing starts are expected to remain at high levels, declining from 1.5 million units last year to 1.488 million in 2004 and 1.422 million in 2005. Bolstered by growing strength in the condominium market, this year's multifamily construction is forecast to remain at last year's 348,000-unit level and decline to 320,000 units next year, according to the forecast.