According to NAHB's forecast, single-family housing starts are expected to remain at high levels, declining slightly from 1.5 million units last year to 1.488 million in 2004 and 1.422 in 2005. Bolstered by growing strength in the condominium market, this year's multifamily construction is forecast to remain at last year's 348,000-unit level, with a small drop to 320,000 units next year.

David Wyss, chief economist, Standard + Poor's, concurred with Seiders that growth in employment and income are heading for higher ground.

"As mortgage rates rise," Wyss said, "mortgages won't be as affordable, but they will still be low by historic standards." He added that the increase in rates shouldn't have much impact on first-time buyers but it could have somewhat of a dampening effect on the trade-up market from home owners who are discouraged by the added financing cost.

Jim Glassman, managing director and senior economist for JP Morgan Chase, expects that the creation of new jobs, productivity-driven increases in income growth, and price stability will help the industry continue to prosper despite a change in Fed policy. He added that he would be surprised to see the Fed increase interest rates this summer "because employment is a long place from where it needs to be."

Publication date: 04/26/2004