Economic outlook brightens

fD IDING a booming housing marl\ket, the U.S. economy is on a solid growth path, with the risk of a double-dip recession "remote," according to a new survey by the National Association for Business Economics.

For 2003, growth is forecast to rise from a 3.37o first quarter rate to a 3.8Vo rate by the fourth quarter.

"Economic growth may not be supercharged, but it is solidly positive," said Tim O'Neill, NABE president-elect and chief economist at BMO Financial Group. "Most of the potential perils that grab headlinesdouble-dip recession, deflation and a housing market'bubble'-are possibilities viewed as remote."

Frank Nothaft, Freddie Mac's chief economist, noted, "Record low mortgage rates have fueled sales, and 2002 will be a record year for home sales, with 6.5 million units sold."

Freddie Mac revised upward its forecast for housing starts in 2002 to 1.66 million units, a 3.75Vo increase over 2001 starts. The agency expects housing starts in 2003 to be just as strong.

The National Association of Realtors agreed that lower-than-projected mortgage interest rates should sustain housing athealthy levels. David

Lereah, NAR's chief economist, said mortgage interest rates have moved lower than most forecasters expected. "The silver lining in the cloud of economic uncertainty is historically low mortgage interest rates," he said. "The 30-year fixed mortgage interest rate dipped under 6.07o at the end of September to a 40-year low."

Six weeks later,the Federal Reserve would cut a key interest rate by half a percentage point, pushing mortgage rates even lower.

Lereah deduced that lower interest rates were offsetting the effects of uncertainty over the economy and international events. NAR forecasts existing-home sales to rise 3.27o for all of 2002 to a record of 5.41 million units, followed by a historically strong 5.28 million sales in 2003.

"Back in January, we were only expecting 5.25 million existing-home sales in 2002," Lereah added. "Although there was a surge of sales activity during the first five months of this year, we've settled down to a very sustainable and historically strong pace for the foreseeable future."

Housing starts are projected to rise 3.lVo to a total of 1.65 million units this year, with the same level of activity expected in 2003.

Lereah said the national median existing-home price this year is pegged at $157,800, up 6.87o from 2O0l; it should rise 4.lVo in 20O3, which would mark a return to a normal appreciation pattern as the market comes into a better balance between buyers and sellers. The typical newhome price is projected to be

Housing starts in 2003 are expected to be just as strong.

$183,700 in 2002, an increase of 4.9Vo from last year. A similar rise is seen in 2003.

NAR projects growth in the U.S. gross domestic product to average 2.4Vo for all of this year and 3.lVo in 2003. Consumer price inflation should be a negligible 1.67o in 2002, with CPI expected at 2.3Vo in 2003.

The association forecasts the rate of unemployment to trend downward to 5.37o by the third quarter of 2003. Inflation-adjusted disposable personal income is forecast to grow 4.47o rn 20O2 and 3.5Ea next year.

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