Car loan massachusetts refinancing

U.S. 2004 home sales and mortgages may beat records

Joseph Vogel, a broker with Residential Mortgage Services Inc. in Bedford, N.H., said this year might be his best ever, even after 2003's record sales of housing.

The lowest interest rates since the Eisenhower administration, the creation of more than a million new households a year and a brightening employment picture will drive housing sales and home- purchase loans to a fourth straight record year, predicted Frank Nothaft, chief economist at Freddie Mac, the second-largest mortgage financier.

Such forecasts suggest homebuilding, which accounts for 5 percent of the $11 trillion U.S. economy and has been supporting the recovery, will continue to fuel growth.

Freddie Mac, the second-largest buyer of U.S. mortgages, predicts that purchases of new and existing single-family houses in the U.S. this year will climb 1.3 percent to 7.28 million. The dollar volume of home-buying loans will grow to $1.4 trillion from $1.3 trillion, Nothaft forecast.

"The market is going absolutely ape," said Robert Toll, chairman and chief executive officer of Toll Brothers Inc., the largest U.S. builder of luxury houses, in a telephone interview from his vacation home in Telluride, Colo.

January statistics

This week, the Commerce Department might report that January sales of new houses rose 1.4 percent from December to a 1.075 million annual rate, based on the median of 53 estimates in a Bloomberg News survey of economists. The National Association of Realtors might say that existing homes last month sold at a 6.28 million annual rate, down 2.9 percent from December, the economists survey found.

Aaren Esh, a 21-year-old claims processor, and her husband, Daniel, 22, a customer service representative for a health insurance company in Phoenix, bought a new house in January. They paid $156,000 for their first home, a three-bedroom with 1,176 square feet and a two-car garage in suburban Peoria, Arizona, moving from a 900-square- foot apartment.

Mortgage rates

With their 6 percent, 30-year mortgage, the payments on the house are $1,176 a month, compared with $843 for their apartment, meaning they added a third more space for $333 a month more.

"We couldn't have gotten the house we wanted without the low mortgage rates," Aaren Esh said.

With economists forecasting a slowing in inflation, the average 30- year fixed mortgage rate might drop to a 45-year low for 2004 of 5.75 percent after reaching a 38-year low of 5.8 percent last year, Freddie Mac's Nothaft said. Measured on a weekly basis, the rate fell to a record 5.21 percent in mid-June and last week reached 5.58 percent, the lowest since July.

"What's remarkable about this period is that we have low inflation and low mortgage rates while we have an expanding economy and job growth," Nothaft said in an interview. "We haven't seen mortgage rates at these lows during an economic expansion for about 45 years."

Builders

Lennar Corp., Pulte Homes Inc. and Toll Brothers are among companies that will benefit from the extended housing boom. The Standard & Poor's Supercomposite Homebuilding Index of 14 companies including Centex Corp. and D.R. Horton Inc. has eased 1 percent this year while the Dow Jones Industrial Average has gained 1.1 percent. Last year, the homebuilder index almost doubled while the Dow Jones average gained 25 percent.

At Toll Brothers' 205 building developments, visits by potential buyers rose 86 percent on the U.S. President's Day holiday weekend Feb. 14-16 compared with a year ago, Robert Toll said. Cash deposits to reserve houses have risen 40 percent in the past five weeks, he said. Toll Brothers is based in Huntingdon Valley, Pa.

"We have a growing U.S. population that has a growing appetite for homes," said Stuart Miller, president and chief executive of Miami- based Lennar, the largest U.S. homebuilder by stock market value, in an interview Friday. "We're going to need at least a million new homes for at least the next 10 years to satisfy that demand."

The U.S. population may expand by 9.2 percent to 319.9 million by 2014, according to Census Bureau projections. The number of U.S. households is expected to grow by 1.2 million each year, according to a report from Harvard University's Joint Center for Housing Studies, in Cambridge, Massachusetts.

Fannie's Forecasts

"This is going to be a record year for housing purchases -- certainly for new housing, maybe even for existing housing," Franklin Raines, chairman and chief executive of Fannie Mae, the largest mortgage financier, told reporters Thursday at the winter meeting of the Business Council in Boca Raton, Florida.

Fannie Mae forecasts that new-home sales this year will about match the 1.085 million sold in 2003, the first year the total exceeded 1 million. Purchases of existing homes may fall 1 percent to 2 percent from the record 6.1 million in 2003, according to David Berson, chief economist at Fannie Mae.

Even as the residential broker Vogel is bracing for a surge in home-loan applications, total U.S. mortgage volume probably will decline 46 percent to $2.04 trillion from a record $3.81 trillion last year, the Mortgage Bankers Association said last week.

Refinancing drops

The drop-off reflects a 72 percent slump in refinancing, which has put cash in consumers' hands and has fueled household spending. The volume of refinanced loans may fall to $715.4 billion from a record $2.5 trillion in 2003, the MBA said in Washington.

"This represents a huge opportunity for us, to reach out and provide distinctive, innovative merchandise to these new homeowners," said Robert L. Nardelli, chief executive of Home Depot, the world's largest home-improvement retailer, in a meeting today with reporters at its Atlanta headquarters. "If you are in retail, there is no sweeter spot than home improvement. "

Housing was expected to slow in 2004 after three boom years. Last month, every major forecaster, including Freddie Mac and Fannie Mae, projected a decline of about 3 percent to the second- best ever, after sales jumped 9.8 percent in 2003.

The rise in consumer prices may slow to 1.7 percent this year from 1.9 percent for the 12 months through December, according to a Bloomberg News survey of 62 economists. Home-loan fixed rates are closely tied to the inflation expectations of investors in mortgage- backed securities.

Bloomberg