January 20, 2018

Fannie: Affordability Woes Expected in 2016

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Fannie: Affordability Woes Expected in 2016

Housing affordability will likely be a challenge in many markets this year as home prices continue to escalate, according to a new report by mortgage-financing giant Fannie Mae.

The main struggle for the economy and the housing market this year will be the “challenge of housing affordability coupled with expected modest economic growth,” Fannie Mae notes in its latest Economic & Strategic Research Group report.

Researchers predict an increase in household income and job security this year, while lending standards ease up and home buyers have easier access to mortgage credit. However, those strides will likely be offset somewhat by higher home prices, particularly in the lower-end of the market, that likely will continue to outpace household income growth. That could chip away at affordability, Fannie Mae states.

From NAR: Expect a More Modest Market in 2016

“We ended 2015 with a positive jobs report, an annual record high for auto sales, and the housing market poised to be the strongest since 2007,” notes Fannie Mae Chief Economist’s Doug Duncan. “The first Fed funds rate hike since 2006 has had a minimal impact on mortgage interest rates so far, and we believe mortgage rates will edge up only gradually, ending the year around 4.2 percent. Despite our expectation of only a small rise in mortgage rates, home price and income dynamics should inhibit home purchase affordability.”

Also, Duncan notes that renters will likely face continued rent increases this year, further hampering their ability to save for down payments.

“Therefore we believe the pace of improvement in total home sales should moderate to 4 percent in 2016,” Duncan says. “However, we expect the increase in single-family starts to accelerate to 17 percent this year, if easing housing supply shortages and a continued strong pace of household formation pan out.”

Source: “Fannie Mae: Housing Affordability Will Continue to be a Challenge in 2016,” HousingWire (Jan. 18, 2016)