The impact of the weakening housing market at the end of 2013 lingered around into the start of 2014.
But this is expected to finally change as the industry heads into the second quarter and continue to build throughout the summer, according to the most recent Fannie Mae March Economic Outlook report.
This should amount to a 2.7% growth for all of 2014.
Although the near-term outlook appears to be clouded, weather returning to seasonal norms should help spur growth in the second quarter, boosted by consumer spending, business investment and housing starts.
“For our March forecast, we expect economic and housing growth to emerge from the tough winter weather and gain momentum into the spring and summer seasons,” said Fannie Mae Chief Economist Doug Duncan.
“Fiscal and monetary policy jitters appear to have waned and the most recent employment numbers came in at reasonable levels, helping to ease concerns of a significant slowdown or risk of recession,” Duncan added.
According to mortgage rate numbers released this Thursday morning, the Federal Reserve taper announcement did not significantly affect the housing market.
Bankrate noted, “The mostly static nature of mortgage rates in recent weeks owes to not much new regarding the economy and the lead-up to Janet Yellen's first FOMC meeting as Chairman of the Federal Reserve. With the Fed maintaining the taper and pledging to hold short-term interest rates at record lows, there were no bombshells in Yellen's initial meeting at the helm of the Fed.”
In first quarter, Fannie Mae said real growth will come in at about 2% on an annualized basis, due somewhat to the weather and in particular to the high level of inventory build-up in the business community, which will have to be worked off.
Duncan predicts that house prices and mortgage rates will take a toll on home sales and homebuilding activity this year, although some modest gains are expected overall.
“Housing starts are expected to rise nearly 20 percent to 1.1 million units this year. In particular, we believe new home sales will continue to perform well as the new home market faces less competition from foreclosures and distressed properties,” Duncan said.
“In addition, supply remains low and time on the market is below the long-term average, which are positive signs for new home sales activity,” he added.
So far in 2014, the housing and consumer markets are a bit muted to what will eventually shake out as the nation thaws, Dan Gjeldum, Guaranteed Rate senior vice president of mortgage lending, said.
"The weather, specifically here in Chicago, has been brutal and the housing market has suffered. However, with the snow melting and sun returning, the market is heating up," Gjeldum said.
For example, he explained that in the past week, in the Chicago suburb where he lives, there has been 3 existing homes that have gone under contract in less than 48 hours from list.
"Not only is that unbelievably fast, but two of the three have sold at or above list price (the three homes ranged from $800,000 to $1.6 million in list price). The new construction in the market has been heating up too, with some of the higher-end homes also selling near full list. We haven’t seen a market paying this close to list price for homes in years," he continued.