What Will the New ‘Normal’ for Housing Be?

Mortgage giant Fannie Mae recently offered some predictions of what the housing market’s “normal” will look like in the next two years. 

In its report, “Transition to ‘Normal’?”, Fannie says while the housing market has shown improvement, uncertainty remains over both the economy and the real estate market. 

“Our forecast is that 2013 and 2014 will exhibit below-potential economic growth,” according to the white paper. “This is despite the fact that we expect the housing rebound will continue and that the economy will benefit from the gradual increased growth of U.S.-based manufacturing, as well as the expansion of domestic energy production.” 

The following are some of the projections Fannie made in its report: 

  • Mortgage rates to stay low: Fannie Mae expects mortgage rates to remain low over the next few years. The mortgage giant expects rates will increase to no more than 4.2 percent by the end of 2014. 
  • FHA loans may get more expensive: More costs may be assigned to Federal Housing Administration loans. 
  • Refinancing drops: The boom in refinancing may have peaked last year with slower activity projected this year. “We expect 2012 to be seen as the high watermark for refinances and 2013 as the first of several transition years as the housing finance market transitions back to a more normal balance between purchase and refinance activity.”
  • Foreclosures continue to fall: Fannie expects foreclosures to continue to decline from their peaks as more alternatives to foreclosure are pursued. 
  • Housing starts to rise: Fannie Mae predicts housing starts will increase 23 percent in 2013 — 60 percent more than the record low in 2010.
  • Mortgage originations grow: “Given our expectations of continued improvement in housing starts, home sales, and home prices in 2013,” Fannie Mae writes, “we project that purchase mortgage originations will rise to $642 billion from a forecast of $518 billion in 2012.”

Source: “‘Normal’ Housing Market May Not be What it Used to Be,” Realty Times 1/30/13