The Office of Federal Housing Enterprise Oversight in Washington, D.C., reported that the average price of a U.S. home increased 12.97 percent from the third quarter of 2003 through the third quarter of 2004. Appreciation in the fourth quarter of 2004 was 4.62 percent, or an annualized rate of 18.48 percent.

The growth in home prices in the last year eclipsed any annual increase in the last 25 years, the Office of Federal Housing Enterprise Oversight reported.

For most individuals, their home is the largest — and best — investment. And with the rising values and lower rates, it may be a good time to sell and move into a bigger house.

Las Vegas home owners saw their values increase the most, nearly 42 percent, compared with a 35 percent statewide gain in Nevada. San Bernardino-Ontario, Calif., was second in the nation with an annual appreciation of 33.81 percent. Other hot housing markets were Honolulu; Washington, D.C., including the Virginia suburbs of Arlington and Alexandria; and Atlantic City, N.J.

Prices in California’s Silicon Valley remained flat after the dot-com bubble burst in 2001, but rose 12.5 percent in San Jose, Sunnyvale and Santa Clara in 2004. However, prices in San Francisco, north of Silicon Valley, and Oakland-Fremont, east of techie heaven, rose 17.2 percent, the Office of Federal Housing Enterprise Oversight reported.

If you are thinking of moving, grab a calculator and see if your dreams of spiffier digs pencil out.

“The number one thing to do when preparing to sell your home is getting rid of clutter,” says Walter Molony, a spokesman for the National Association of Realtors in Washington, D.C. “Clutter makes your house look smaller.”

Since competition is fierce, make the listing agent and bank earn your business.

Franchised giants such as Coldwell Banker and Century 21, divisions of Cendant, go head-to-head with local or regional companies. Review the market in your area by checking the real estate listings online with major Internet companies such as America Online, a division of Time Warner; Yahoo!; Google; and MSN. (MSNBC content is distributed by MSN. MSNBC itself is a Microsoft - NBC joint venture.)

When looking for a mortgage, call Rob Colvin at 480-577-7277

–
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Division president
Stewart Title of California
Santa Clara Co., Calif.

“I think it’ll be a pretty good year. I don’t expect anything drastic one way or the other. I think it will be pretty steady. But what the country’s doing in terms of war, terrorism, globally speaking, that’s the unknown. There was a time when in California we’d just worry about earthquakes and Mother Nature. And now we have this relatively new factor. If things stay relatively normal in terms of the situation our country’s in, I think it’ll be a pretty good year.

“Rates may inch up a little bit over the course of the year, maybe 1 percentage point. The economy is bouncing back. We may lose in the refinance business, but the purchase market will stay fairly strong.”

Pava Layrer
President
Heritage National Mortgage Corp.
Grandville, Mich.

“For most of this year, we’ve been in more of a seller’s market. I think that’s going to carry over into next year. I’m seeing more and more young first-time home buyers coming in – 18-, 19-, 20-year-olds.

“Interest rates? Obviously that’s the million-dollar question. I think we’re going to touch near the sevens, and they will float back and forth a little bit. I don’t see how they can’t go up. If the economy starts to do an upswing, they’re going to go up a little higher. They’ll probably stay in the upper sixes. I could be dead wrong, but it’s just a sense of where rates are going to go. But if something happens to Greenspan, all bets are off. Next year, I think my industry is going to have to work more efficiently and more old-fashioned for the business. It’s not going to be easy money.”

Each year, Inman News reports on what the major trade group economists are forecasting for real estate the coming year. This year, when we caught up with housing gurus to talk about their 2005 forecasts, we decided to look back at what they told us last year to see how their original predictions played out.

Here’s a look back at what the trade groups originally predicted was in store for 2004, compared with what each is now predicting for this year totals. We also include what they are now forecasting for 2005

National Association of Realtors chief economist David Lereah sees 2005 as a strong year, but not a record-breaker like 2004.

“All of our numbers still look like the second-best year ever,” Lereah said. “But for the last three years, I’ve been projecting a second-best year ever and I’ve been wrong. It’s been the best year ever.”

By the end of next year, Lereah anticipates interest rates on the 30-year fixed-rate mortgage will be about 6.9 percent, a full percentage point higher than they are now. But he expects the rise will be gradual and not cause a big shock to the housing industry, which currently has the factors in place for continued success.

“The fundamentals are all good in housing right now,” Lereah said. “The supply is lean, demand is still strong, households can still afford to buy the homes and that’s the important thing.”

NAR
2004 prediction
2004 actual
2005 prediction

Existing-home sales
5.9 million
6.58 million
6.38 million

New-home sales
1 million
1.18 million
1.13 million

Housing starts
1.71 million
1.95 million
1.87 million

Median existing home price
$180,712
$182,500
$191,625

Median new-home price
$204,120
$214,600
$227,047

Rates on 30-year fixed mortgage
6.5 percent
5.8 percent
6.4 percent

Unemployment rate
5.7 percent
5.4 to 5.6 percent
5.1 percent

Doug Duncan, chief economist for the Mortgage Bankers Association, anticipates interest rates on the 30-year fixed-rate mortgage to rise to about 6.25 percent by the end of 2005. But Duncan doesn’t believe the higher rate will cut into the home purchase market much. Any rate increases, however, will whittle away what’s left of the refinance market.

“It’s going to be a pretty good year, but it won’t be as good as 2003 or 2004,” Duncan said.

Considering how those years turned out, that’s certainly nothing to sneeze at. It’s all about perspective, Duncan said.

“Part of the problem that everyone talks about is that it’s been so great for so long that expectations have to be adjusted,” Duncan said.

MBA
2004 prediction
2004 actual
2005 prediction

Existing-home sales
5.74 million
6.51 million
5.98 million

New-home sales
1 million
1.17 million
1.05 million

Median price of existing homes
$178,300
$181,700
$190,300

Median price of new homes
$195,600
$211,500
$218,100

Rates on 30-year fixed mortgage
6.1 percent
5.8 percent
6.1 percent

Mortgage originations
$1.6 billion
$2.8 billion
$2.3 billion

Housing starts
1.7 million
1.94 million
1.85 million

NAHB’s chief economist, David Seiders, has said that while new-home inventories will remain lean and demand high, 2005 will bring about a flattening in the new home market.

The housing market has been “nothing short of phenomenal,” Seiders said at NAHB’s construction forecast conference earlier this year. Yet, he said, the housing market is in the

process of “reaching its limits” and “topping out.”

In both new home sales and housing starts, Seiders is forecasting a slight decline from 2004 projected totals. Like other economists, he expects interest rates to rise next year. Unlike other economists, NAHB doesn’t release a forecast for median home prices.

2004 prediction
2004 actual
2005 prediction

New-home sales
1.01 million
1.16 million
1.1 million

Mortgage rates
6.6 percent
5.8 percent
6.5 percent

Housing starts
1.72 million
1.94 million
1.85 million

California Association of Realtors

The California housing market is watched closely nationwide. This year, some markets in southern California saw signs of softening, with inventories rising and price appreciation rates slowing down.

Leslie Appleton-Young, chief economist for the California Association of Realtors, calls her prediction for 2005 a “soft landing” for the state’s housing market.

“2004, by all indications, looks to be the peak of this market cycle,” Appleton-Young said.

She anticipates news year to be remain strong, with California’s median home price increasing by about 15 percent. However, that figure doesn’t show that inland areas that tend to have more affordable housing will be the areas to experience the higher price appreciation rates. Areas along the state’s coast will see smaller price gains, she said.

CAR State forecast
2004 prediction
2004 actual
2005 prediction

Median home price
$414,100
$454,720
$522,930

Existing home sales
548,500
619,300
603,700

Mortgage rates
6.6 percent
5.8 percent
6.6 percent

Affordability index*
19 percent
19 percent
16 percent

Unemployment rate
6.4 percent
6.2 percent
6.1 percent

*CAR’s affordability index is the percentage of households able to afford a median-priced home