Home Sales Expected to Accelerate
After a slow start this year, home sales are predicted to play catch up for the remainder of 2014, according to the Freddie Mac U.S. Economic and Housing Market Outlook for July. The report showed mixed data results for the housing recovery as we head into the second half of the year. While sales are predicted to improve, home sales forecast remains at 5.4 million, a slippage of about 2 percent compared to last year. Existing sales are projected to be 3 percent lower, whereas new home sales are projected up by 10 to 15 percent.
The report projects that new housing construction will increase about 14 percent in 2014 compared to 2013. Housing starts for 2014 are forecast to be 1.05 million dwellings with multifamily accounting for about one-third.
"Although the economic news for the first half of 2014 has been bittersweet, there is good news to share as we head into the latter half of summer,” says Frank Nothaft, Freddie Mac vice president and chief economist. “In particular, employment was up by nearly 1.4 million during the first six months and this will bolster household formations, resulting in positive gains most immediately for the rental housing market and then, longer term, for single-family home sales. The multifamily rental market has led the rest of the housing sector into recovery, and about one-third of housing starts in the first quarter were for multifamily rental apartments. There's no question the single-family recovery is moving slowly, but it continues to doggedly press forward and we are cautiously optimistic."
The employment picture has improved, with a net monthly growth of 231,000 nonfarm jobs for the first half of 2014. Stronger employment will translate into more household formations and a pickup in rental housing demand, with future gains for the single-family sales market.
Single-family mortgage originations are down following a lackluster spring home buying season and a sharp drop in refinance. For this reason, the mortgage originations forecast for 2014 was reduced by 6 percent to $1,175 billion.
Freddie Mac expects fixed mortgage rates to rise very gradually during the year in keeping with the Fed's plan to keep interest rates low at this time. Look for the average 30-year fixed mortgage rate to end the year still near historic lows at around 4.4 percent, according to the organization.
For more information, visit FreddieMac.com.