Real Estate

Housing market surge may wane in time

The outlook for housing continues to remain positive, with economists predicting a sustainability that may last for years. But don’t expect housing to pull all of the nation’s economic weight going forward, as the housing recovery, may only be temporarily accelerated.

In an updated economic outlook from the government-sponsored enterprise, Fannie Mae, chief economist Doug Duncan said,”On balance, we see some improvement in our outlook for growth this year, primarily because of continued strength in the housing market and the kicking the can down the road as remaining fiscal issues continue to unfold.”

In July last year, HousingWire reported that the housing recovery should help buoy consumer confidence and provide a mild lift to second half economic output. The news from Fannie adds to the growing body of evidence that housing will continue to be an economic bright spot for the nation’s future financial health.

According to Fannie Mae’s housing forecast report from March 2012, in the first quarter of 2013, first-time home purchases were at 117 billion, but it is expected to drastically grow and reach 179 billion in the second quarter of 2013 and 192 billions in the second quarter of 2014.  

So, yes, mortgage originations will remain a bright spot. But an economic saviour? No.

However, mortgage refinance market share is expected to drop dramatically in the coming years, making up only 52% of mortgage originations in the fourth quarter of 2013 and 33% in the fourth quarter of 2014, the report states.

First-time home purchases attempt to pick up the slack in refinances, but even with a expected growth, mortgage originations are predicted to drop.

“We expect economic growth to come in at 2.1% in 2013, as strength in the housing market and business investment will help to offset fiscal tightening,” said an economic and strategic report from Fannie Mae.  “Tax increases will restrain activity in the first half of the year, but we expect growth to pick up in the second half.”

It explained, “As we mentioned in last month’s commentary, several factors could cause growth to come in faster than we project, including stronger home price appreciation, which could result in a virtuous cycle that feeds into more favorable housing activity, consumer sentiment, and consumer spending.”


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