Fannie Mae economists said the U.S. economy is poised for growth despite having stalled during the first quarter, but they noted that housing remains the weakest link, Inman News reported May 21.
Fannie Chief Economist Doug Duncan said that the growing financial and labor market should reflect a rebound when reports come out for April, May and June, and show that growth accelerated to an annual rate of 3 percent.
However, Duncan said that housing recovery remains more tenuous with existing home sales, new home sales, housing starts and multifamily housing all showing year-over-year declines in the first three months of the year. He said he hopes for modest growth this spring and summer, although he does not anticipate housing to get back to normal levels until 2016.
Duncan attributes some of housing market stall to a slowdown in both affordability and consumer conservatism, Inman News reported.
Fannie economists are now calling for 2014 sales to fall by 2.1 percent, dropping to 4.98 million. Housing prices, meanwhile, likely will grow by 5 percent, but purchase loan originations will fall by 3 percent to $710 billion.
Rising interest rates have reduced interest in mortgage refinancing. Fannie anticipates total first-quarter mortgage loan originations to come in at about $237 billion, which is the lowest level in 14 years, Inman News reported.
Fannie attributes some of the housing slump to lack of inventory on the lower-end where so many borrowers remain underwater on their mortgages.
Inman reported that March home sales were at their slowest pace since July 2012, down 6.6 percent from the same point one year ago.
Nevertheless, according to a survey by Fannie, 42 percent of consumers say now is a good time to sell. And pending home sales were up 3.4 percent in March after eight consecutive months of decline, Inman News reported.
A contributing factor is that banks remain skittish on approving mortgage loans. The Federal Reserve Board’s surveys of senior loan officers showed continuing tightening of loan underwriting standards, particularly for subprime and nontraditional mortgages.
The Federal Housing Finance Agency’s new director, Mel Watt, has pledged to expand mortgage credit access — a move that Inman News columnist Lou Barnes called an “astounding political turn for the better for mortgage credit.”