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NAR: Housing and Economy in 'Tug Of War'

WASHINGTON, DC-National Association of Realtors' chief economist, Dr. David Lereah, expects housing sales to increase 2.5% this year, for new home sales to hold steady and housing starts to increase 0.9%.

By Diane Cook | Updated on January 16, 2001

WASHINGTON, DC-The US is in the middle of a classic tug-of-war between lower interest rates and slowing economic growth, according to information released by the National Association of Realtors. NAR economists are citing a number of factors for this conflict.

The association’s chief economist, Dr. David Lereah, is quoted as saying that in the short run for housing, the positive impact of lower interest rates wins the battle–but the inhibiting effects of a slowing economy may win the war. The real question is whether the Fed will be successful in orchestrating a soft landing, or will it come in for a hard landing. The wild card here is the affect increased energy costs, which releases less money for consumer spending.

Yet, housing remains the strongest sector of the economy, driven by a combination of demographic demand, low unemployment and affordable interest rates, Lereah said. “About 85 million people are entering the market as first time home buyers, and are benefiting from the drop in interest rates,” he said. The 30-year fixed mortgage interest rates are expected to average 6.9% this year.

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