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Economists in Reuters Poll See Stronger Sales, Weaker Prices in 2015

The annual pace of existing home sales will likely rise to 5.25 million units in the first three months of 2015 from 5.09 million in the current quarter, according to a Reuters poll of economists

But prices next year will be weaker than this year. The S&P/Case-Shiller gauge of property values in 20 metropolitan areas was seen rising just 5.0 percent in 2015, slower than the expected 8.0 percent this year. That is roughly steady compared with a poll taken three months ago.

For much of the last year, the index had posted double-digit gains, fueling concerns many potential home buyers would be priced out of the market. Asked to judge whether the U.S. housing market was fairly valued on a scale of one to 10, with 10 being extremely over-valued and one being extremely undervalued, the median answer was five.

Stronger job creation in the United States is making economists more optimistic about the outlook for home resales over the next two years, that showed little change to expectations for house price rises.

Much of the added optimism draws from the six consecutive months through July in which U.S. employers added more than 200,000 jobs. The median says the annual pace of home resales will rise to 5.29 million in the second quarter of next year.

A sharp increase in mortgage rates pushed sales of existing homes lower in the second half of 2013 but borrowing costs have been more stable in recent months and sales have recovered some of the lost ground.

Investors and economists polled by Reuters generally expect the Federal Reserve will begin to slowly increase its benchmark interest rate around the middle of next year after holding it near zero since 2008.

Most analysts saw mortgage rates rising more slowly than they did in the last Reuters housing market poll in May.

The median forecast put the 30-year mortgage rate at 5.25 percent in 2016, down from 5.68 percent in the May poll. Last week, the 30-year rate averaged 4.28 percent, according to the Mortgage Bankers Association.

Some policymakers and economists worry inflation could unexpectedly surge and prompt faster rate hikes, and many analysts polled said this was the biggest risk to the housing recovery.

But economists generally said the housing recovery won’t be deterred by a slow increase in rates, which could be a symptom of an improving economy while also helping to bring home price appreciation back down to more sustainable levels.

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