The housing market is starting to show some improvement after a slow start to the year, but home sales likely will still likely be shy of 2013 numbers, according to Fannie Mae’s June 2014 Economic Outlook, released this week.
"Home price improvements have contributed to consumers’ household wealth, but overall growth in the housing market pulled back in the first quarter, with major housing indicators coming in lower year over year compared to the first quarter of 2013," says Doug Duncan, Fannie Mae’s chief economist. “More recent housing indicators were mixed, with only moderate improvement despite the decline in long-term interest rates.”
Fannie economists are predicting that home sales in 2014 will be about 2 percent lower than in 2013. Economists project that new-home sales will increase between 12 to 15 percent this year while existing-home sales will decline year-over-year.
The labor market continues to be a strain on growth in the market. However, “consumers should get a boost going forward due to continued rising household net worth, which is improving rapidly but remains well below the 2006 peak, as well as firming labor market conditions, which have showed steady albeit unspectacular gains,” Duncan says.
Loan demand also has been on a declining trend, despite interest rates hovering near their yearly lows, according to the Mortgage Bankers Association.
“While the recent uptick in rates may have a little to do with a drop in mortgage application volume, purchase activity in many areas nationwide continues to suffer from a lack of inventory and confidence," Bill Banfield, Quicken Loans vice president, told HousingWire. "Many consumers are very content with keeping their homes off the market, especially during the summer.”
Still, the market did receive some good news this week: Existing-home sales were up 4.9 percent in May -- the highest monthly rise since 2011, according to the National Association of REALTORS®. New-home sales also posted an increase, jumping 18.6 percent to its highest level since 2008.
Fannie economists are optimistic that the housing market and economy will continue to pick up after a slow start to 2014.
"We remain confident that the first-quarter drop in activity will reverse, and we are seeing some positive signs in the current quarter, but economic growth likely will be playing catch-up for the rest of the year," Duncan says.
Source: Fannie Mae and “The Housing Market’s Failure to Launch in 2014,” HousingWire (June 24, 2014)