Wednesday
November 26, 2014

Mortgage Giant Tweaks 5 Projections for Housing in 2014

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Mortgage Giant Tweaks 5 Projections for Housing in 2014

Regular supply and demand forces continue to produce unexpected results in the housing recovery, according to Freddie Mac’s U.S. Economic and Housing Market Outlook for May.

“The housing recovery is struggling to shift into a higher gear, and obviously there are various imbalances holding this back from happening, but at the heart of the matter it comes down to jobs,” says Frank Nothaft, Freddie Mac’s chief economist. “Housing needs stronger, and just as important, sustained levels of job creation to get the housing engine firing on all cylinders. April’s jobs numbers were encouraging, and nothing will solve the supply and demand factors faster than keeping employment growth going.”

As such, Freddie Mac revised its housing forecast and lowered several indicators.

“While we still see an improving trajectory for the housing market, we're pushing it out a few months from our earlier forecast because we expect GDP growth to pick up in the final three quarters of the year from what was clearly a dismal first quarter reading,” Nothaft notes.

The mortgage giant’s latest report showed the following projections for the market for 2014:

1. New-home construction: Starts on new homes are expected to rise by 18 percent this year.

2. Home prices: Appreciation is expected to moderate to an annual growth of 5 percent this year.

3. Sales: New and existing home sales are expected to hold at 5.5 million, the same as 2013. The inventory of homes for sale remains low in many housing markets across the country.

4. Household formation: Net household formation continues to rise, but the overall levels remain lower than what is expected, Freddie Mac notes. “Stronger job and income growth are necessary to support additional household formation,” Freddie notes.

5. Mortgage rates: The 30-year fixed-rate mortgage is expected to gradually inch higher and end the year around 4.6 percent. “We expect fixed rates to rise gradually during the second half of the year in part as a result of the Federal Reserve’s ‘tapering’ of net MBS acquisitions,” according to Freddie Mac’s report.

Source: Freddie Mac

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