Forecast: housing prices to rise modestly

Your home will continue to be one of your best investments this year, if the latest forecast from the National Association of Realtors is correct. The real estate trade group's Real Estate Outlook: Market Trends and Insights says the national median existing home price will rise 7.1 percent this year. The median price for new homes will rise 5.1 percent.

The group also forecasts that mortgage rates will rise modestly, with the average 30-year fixed-rate mortgage reaching 6.4 percent in the fourth quarter and 6.8 percent in 2006.

NAR chief economist David Lereah says higher oil prices are having a dampening effect on economic growth.

"A side benefit is that mortgage interest rates will be rising less than expected," he says. "The essentially sideways movement in mortgage interest rates recently has defied the consensus of earlier forecasts, with only a modest uptrend detectable over time."

The NAR forecast expects home sales to fall short of last year's records. It estimates existing home sales in 2005 to be 6.7 million, down 1.2 percent from 2004. New home sales will fall 2.5 percent to 1.17 million, it says.

What are people saying about mortgages today:

Rates on 30-year mortgages edged down last week to a seven-month low. Mortgage-giant Freddie Mac reported Thursday that 30-year, fixed-rate mortgages fell to 6.3 percent, down slightly from 6.31 percent two weeks ago. It put rates at the lowest level since they were at 6.24 percent the first week of March.

Bank of Hawaii, Central Pacific Bank, Territorial Savings Bank and Wells Fargo Home Mortgages all cut their 30-year mortgage rates to 5.75 percent this week.

Most people think of a mortgage as a means to an end. After all, you buy a house, not a home loan. But a mortgage is much more than the path to homeownership. It is a financial instrument that must be managed, just like any other financial investment.