The Housing Market Is Outperforming Forecast

The housing market has been off to a roar this spring. In fact, the market is performing so strongly that the National Association of REALTORS® has upgraded its forecast for the year.

At the start of the year, home sales were expected to match last year’s pace due to higher mortgage rates and diminishing affordability. But the market is hardly slowing down, notes Lawrence Yun, NAR’s chief economist. He now predicts existing-home sales to rise by 3.5 percent, and home prices likely will increase 5 percent this year.

“With no imminent threat of a recession, the housing market’s strong first quarter sets the foundation for continued gains the rest of the year,” Yun writes.

Source: “First Quarter GDP May Be Cool, But Housing Market Downright Balmy,” The Hill (May 1, 2017)

Predictions Roll in: 2017 Housing Forecasts

We can expect a hot year for home sales in 2017, according to recent forecasts from the National Association of REALTORS®, the Mortgage Bankers’ Association, Freddie Mac and Fannie Mae, etc!

NAR is predicting existing-home sales to reach 6 million in 2017, higher than its 5.8 million forecast for this year. But other entities are even more bullish. MBA is predicting home sales to eclipse 6.5 million next year, while Fannie Mae and Freddie Mac are both predicting 6.2 million.

A huge wave of Generation Yers, who have delayed home buying, are emerging into their key buying years. They are predicted to keep home sales and condo sales strong well into 2020, according to economists.

Source: “Home Sales Expected to Increase Nicely in 2017,” Keeping Current Matters (Sept. 29, 2016) and “U.S. Housing Market Forecast – Strong 2017 to 2020,” GordinCollins.com (Sept. 24, 2016)

Fannie Mae Predicts ‘Cheap Loan Rates to Remain’

Mortgage financing giant Fannie Mae dropped its mortgage rate forecast for next year about two-tenths of a percentage points from its prior forecast, projecting 30-year fixed rates will remain lower than initially thought, at about 4.3 percent next year.

This will cheapen the borrowing costs for home buyers and refinancers, helping to make home ownership more affordable. However, with the forecasted rate drop, Fannie Mae economists didn’t adjust the forecast for total home sales for 2015.

“The housing market continues to grind its way upward, but we don’t expect a breakout performance in 2015 as the fundamentals remain somewhat muted,” says Doug Duncan, Fannie’s chief economist. “We believe that mortgage activity in 2015 will be very similar to 2014.”

But will another year of low rates spur more home buying?

“The relatively lower rates after the spikes of the early 80s did stimulate buying,” says David Crowe, chief economist at the National Association of Home Builders. “This time around, the low rates are still not as low as they [recently] were so the relative advantage is not as great. … [Also] the current situation is much more driven by the availability of mortgage credit than the cost.”

Source: “Fannie Cuts Mortgage-Rate Outlook, But Home Buyers May not Bite,” MarketWatch (Nov. 20, 2014)