David Lereah, the association's chief economist, said low mortgage interest rates will keep the housing market at a sustainable pace. "Home sales appear to be settling into a groove. Although record levels of buyers have recently fulfilled their housing dreams, historically low mortgage interests rates are opening the doors of homeownership to first-time buyers and sustaining the trade-up market," he said.

"The continued sluggishness in our economy has caused mortgage interest rates to drop to the lowest levels since the 1960s," Lereah said. The association projects the 30-year fixed mortgage interest rate to average 6.3 percent in the current quarter, but it is expected to rise gradually to 7.3 percent by the end of next year.

"We forecast the sales pace of existing homes to hover in the range of 5.1 million to 5.3 million through the end of next year," Lereah said. Overall sales in 2002 are forecast to rise 2.7 percent to a total of 5.44 million units, a new record, with about 5.22 million expected in 2003, which would be one of the top three years on record.

New-home sales should rise 1.9 percent to a total of 926,000 units this year, also a record, then ease to 898,000 in 2003, which would be the third highest on record. Housing starts are seen to rise 3.5 percent to a total of 1.66 million units in 2002, then ease slightly to 1.63 million next year.

"Tight housing inventories have placed a lot of pressure on home prices this year," Lereah said. "With a more even pace of home sales, we should see a better balance between buyers and sellers in 2003. As a result, the rate of price increases should slow to historic norms next year."

The association forecasts the national median existing-home price to rise 6.6 percent to $157,500 in 2002, and then increase another 4.2 percent next year. The typical new-home price is projected to be $184,800 this year, up 5.5 percent from 2001; it's expected to rise 5 percent next year.

Lereah said growth in the U.S. gross domestic product is expected to average 2.4 percent for 2002 and 3.0 percent in 2003. Consumer price inflation for 2002 should be only 1.8 percent, then 2.7 percent in 2003 with the economy on a sounder footing.

The unemployment rate is predicted to reach 6.1 percent in the current quarter, then gradually decline to 5.4 percent by the end of next year. Inflation-adjusted disposable personal income is forecast to grow 4.4 percent this year and 3.1 percent in 2003.

Information provided in this column is presented by the Realtor members of the Silicon Valley Association of Realtors at www.silvar.org. Send questions on any topic to jnewton@jnpr.com.