David Lereah, the association's chief economist, said weak economic growth at the end of 2002 means it will take a little longer for momentum to build this year. "Growth in the U.S. gross domestic product should rise to 2.9 percent this year from 2.4 percent in 2002; however, we project the GDP will pick up steam and reach an annual growth rate of 4.1 percent in the fourth quarter," he said. "The silver lining will be a continuation of affordable mortgage interest rates, especially during the first half of this year, which will help to sustain the strong momentum we currently have in the housing market."

Lereah expects the 30-year fixed mortgage interest rate to average 6.2 percent during the first half of 2003 before rising to 6.6 percent in the fourth quarter.

Freddie Mac Chief Economist Frank Nothaft said, "Mortgage rates are in a holding pattern right now as the country tries to smooth out the knots in the economy. Low rates are a real boost to an already thriving housing market. Not only did we see record home sales and the national homeownership rate peak to an all-time high of 68.3 percent last year, but 2003 is shaping up to be equally as strong."

"Over the last few months, the number of mortgage applications for home purchase has averaged at near-record levels, according to the Mortgage Bankers Association of America, which suggests no immediate slowdown in housing anytime soon," added Nothaft.

The National Association of Realtors forecasts 5.40 million existing-home sales in 2003, second only to 5.56 million sales in 2002. At the same time the association expects 959,000 new-home sales, down modestly from a record 976,000 sales last year. Housing starts are forecast at 1.69 million units this year, slightly below the 1.71 million units recorded in 2002.

The rise in the national median existing-home price is expected to slow this year, but with a persistence of lean inventories of homes available for sale it should continue to rise at a rate above historic norms. "We expect the median existing home price to increase 4.8 percent in 2003 to $165,800," Lereah said. "At the same time, consumer price inflation should be only 2.5 percent—so home price appreciation will remain a little above the historic norm of one to two percentage points above inflation." The median new-home price is likely to rise 4.2 percent in 2003 to $192,900.

Lereah projects the unemployment rate to gradually decline to 5.6 percent by the end of the year. Inflation-adjusted disposable personal income is seen to grow 3.5 percent in 2003, following a 4.5 percent rise last year, while the consumer confidence index is expected to rise from an estimated fourth-quarter 2002 reading of 82 to an index of 113 by the end of this year.

Information provided in this column is presented by the Realtor members of the Silicon Valley Association of Realtors at www.silvar.org. Send questions on any topic to jnewton@jnpr.com.