David Lereah, the association's chief economist, said housing, like other sectors of the economy, is not immune to war. "The war in Iraq has caused some economic uncertainty, but the housing industry is better postured to weather negative influences," he said.

Lereah said the war, combined with weak economic growth, will keep interest rates low for the foreseeable future. "With tighter consumer spending, the Federal Reserve will keep the lid on interest rates," he said. "Long-term rates on home loans also will remain low if the inflation rate remains under control. This should continue to stimulate the housing sector and help to provide a solid base for the U.S. economy."

Lereah expects the 30-year fixed mortgage interest rate to remain affordable but to rise slowly to 6.3 percent by the end of the year. "On an annual basis, mortgage interest rates should average 6.1 percent in 2003, the lowest since Freddie Mac starting tracking them in 1971," Lereah said. Other sources indicate mortgage rates haven't been lower since the mid-1960s. "According to the Federal Housing Finance Board, the last year when interest rates were lower was in 1965, when the average 30-year fixed rate was 5.95 percent."

Lereah expects 5.53 million existing-home sales in 2003, just below the record of 5.57 million sales in 2002. New-home sales are forecast at 928,000 units this year, down from a record of 974,000 sales in 2002. Housing starts should total 1.68 million units this year, somewhat below 2002.

"The rate of home-price appreciation really hasn't slowed yet, but we should see some moderation this year," Lereah said. The national median existing-home price is expected to rise 4.8 percent in 2003 to $165,900. The median new-home price should rise 3.4 percent this year to $193,400.

Growth in the U.S. gross domestic product should accelerate during the second half of the year and reach an annual growth rate of 4.0 percent during the fourth quarter. Consumer price inflation should be 2.6 percent in 2003.

The National Association of Realtors projects inflation-adjusted disposable personal income to grow 3.0 percent this year, while the unemployment rate should peak at 6.0 percent in the second quarter before job growth improves. The consumer confidence index is expected to drop to 68 in the second quarter before rising to 87 by the end of this year.

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.