Fannie Mae housing outlook sees smoother road ahead
Fiscal headwinds are expected to keep growth to below 2% for the first half of the year. However, as fiscal drags wane in the second half of 2014, growth should continue to move in the positive direction during an ongoing housing recovery, according to the Fannie Mae latest housing outlook report.
Housing was largely positive entering the spring and summer season, with various indicators such as home prices, home sales and homebuilding activity showing signs of long-term improvement toward normalcy.
"At the outset of the year, we forecasted that 2013 would witness sustainable but below-par growth as the economy begins its transition to more normal levels. Halfway through the year, our view is little changed," said Fannie Mae chief economist Doug Duncan.
He added, "We expect approximately 2.1% growth over the course of 2013, up from the anemic pace of 1.7% in 2012. Our forecast calls for growth to push past 2.5% in 2014, boosted largely by tailwinds from the strengthening housing market."
Despite rising mortgage rates during the past month, which have affected refinance originations, affordability conditions remain high and should not present a significant obstacle to potential homebuyers.
Home sales, especially for new single-family homes, were upbeat in April, rising to the highest level since April 2010.
Despite the surge in new home sales over the past two years, the level of sales has remained near the record low relative to the size of the population, the enterprise noted.
"Our forecast calls for steadily rising new home sales, reaching normal levels by 2016, when the ratio of new home sales per 1,000 population approaches 2.7%. This would mark a 10-year process of transition for the downturn back to normal activity, coinciding with out expectations of normal activity for homebuilding activity, existing home sales and construction employment," analysts for the government-sponsored enterprise explained.
The expectation of rising prices may entice potential homebuyers to get into the market.
For those who want to sell but have waited for better prices, rising home prices amid tight inventories could signal more favorable selling conditions, the GSE stated.
Declining distressed sales as well as limited inventory levels have been key drivers of rapid house price appreciation.
A survey from the National Association of Realtors showed that the share of distressed sales declined in April to 18% — 10 percentage points below the share last April.
However, signs that tight supply conditions are easing have emerged, at least in the existing home segment, with the number of existing homes listed for sale having risen sharply over the last several months.
"Tight inventory in the new home market has created an opportunity for speculative (or spec) building — a house built in advance without a contract signing from a buyer. Building on spec was common during the housing boom, as builders attempted to keep up with soaring demand," Fannie Mae concluded.