Our Economy, Interest Rates and The Housing Market

There has been a lot of guess work going on about our housing market, how it will be effected by interest rates, the economy, gas/oil prices and now the affect Hurricane Katrina and the devastation of the Gulf Coast.

Situation Analysis:
1) Interest rates have continued to stay low and have gone down over the past few weeks.
2) There are more people buying houses today then ever before. Many Baby Boomers own homes and are now buying second homes.
3) The Echo Generation, children of baby boomers, are now reaching home buying age with the leading edge now being 23 years old.
4) Oil prices are higher then they have ever been before.
5) Our nations economy is under a great deal of stress due to the war in Iraq and now recovery from Hurricane Katrina.

Since there is no way that one person can be an expert in all of these areas I look to people whose opinion I trust. In this area it would be David Lereah, Chief Economist for the National Association of Realtors.

David Lereah, NAR’s chief economist, said Tuesday that shortages of building materials, made worse by the need to rebuild in areas hit by Katrina, will increase construction costs.

“Given the general tight inventory of homes available for sale across the country, rebuilding in the region of the Gulf Coast will place additional pressure on overall home prices,” Lereah says. “As displaced residents try to get back on their feet in new locations, home sales have spiked -- along with rental demand -- in regions surrounding the disaster zone.”

In addition, mortgage rates are likely to rise more slowly as the national economy absorbs the hurricane's $100 billion-plus blow, keeping sales brisk, Lereah said.

Lereah boosted his estimates of new and existing home sales for the year, seeing records for both. He said resales of previously owned homes should climb 3.4 percent to 7.02 million units in 2005, up from last month's estimate of 6.98 million for the year. New home sales should increase 6.7 percent to 1.28 million, up from his prior forecast of 1.26 million.

I've had the opportunity to meet David at functions hosted by The Washington Association of Realtors. He is a pretty sharp guy whose job it is to track this stuff. If you see him quoted in news articles take note.

Remember.......Much of the world would love to have the option to buy or sell a home but they can not. Americans have the greatest home ownership opportunity in the world!!!!!!
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