Mortgage Bankers Association Suggests Housing Market Improvement In Future

Following the worst years for the housing market that most Americans have seen in their lifetimes, the years ahead could actually bring some of the best years for the very same market.

Based on market cycles, census data and other study factors, the Mortgage Bankers Association (MBA) delved into the housing outlook over the next decade to find that “By 2024, demographic and economic changes will bring what could be one of the largest expansions in the history of the U.S. housing market — 15.9 million additional households.”

The findings were published by the MBA in a white paper this week noting the strong housing projections are driven largely by a shift in age cohorts, and that all sectors of the housing market stand to benefit.

The precise mix for rental versus purchase demand will depend upon consumer choices, relative costs and government policy, MBA says, but both will be promising.

“Households will compare the costs and benefits of owning and of renting, while housing developers and investors will respond to price and rent signals — each mechanism providing a release valve when pressure builds in a particular market,” MBA states in its findings. “…regardless of the mix [among rental demand and homeownership],demand for all types of housing will be strong.”

Relative to the aging demographic, in the coming decade, the Census Bureau projects there will be 20 more people who are age 60 or older, driving household decisions for older renters and homeowners.

View the full findings from the Mortgage Bankers Association.

New Homebuyer Uncertainty

From the Reverse Mortgage Daily July 20th, 2014

Despite improving housing market conditions, young adults today are hesitant to become home buyers, further hampering the economic recovery, Bloomberg reports.

Even Sara Stevens, the 27-year-old daughter of Mortgage Bankers Association CEO David Stevens, says she’s not buying anytime soon.

“I watched cousins and other family members go through pretty tough situations in 2008 and 2009,” Sara Stevens tells Bloomberg. “I can’t tell you how many of them [my dad] tried to help get out of bad mortgages.”

Stevens and other millennials watched on the sidelines as family members experienced the effects of the collapse of Lehman Brothers, which triggered a financial meltdown six years ago. Because of this, Bloomberg reports, many young adults are more risk averse and view the potential upsides of status and wealth more skeptically than people did before the crisis, altering the homeownership calculation.

But now seems to be a prime time to invest in a home. Bloomberg data shows that from 1984 to 2014, interest rates have decreased from 13.9% to 4.1%; first-time buyers affordability index has increased from 64.9 to 116; mortgage payments as share of income has decreased from 28.2% to 14.2%; and unemployment among 24- and 25-year-olds has decreased from 7.9% to 6.9%.

Despite the favorable conditions, first-time buyers only make up 27% of the market, when historically the percentage has been closer to 40.

Uncertainty and doubt currently overshadow Millennials’ desire to become homeowners — what was once considered to be the “American Dream.” But until they decide to take the plunge, the housing market won’t quite recover.

“Without first-time buyers, current owners have a harder time selling and trading up, depressing the market and dragging down the economy,” Bloomberg writes. “U.S. homeownership fell for the ninth straight year in 2013, to 65.1 percent, according to the Commerce Department. The MBA is projecting sales will decline for the first time in four years.”

June Housing Survey From Fannie Mae Shows Outlook Up

Consumers believe that their outlook is getting better. But they are not necessarily ready to participate in the housing market just yet. The June Housing Survey released by Fannie Mae shows that consumer sentiment toward the housing market is continuing to improve as the overall economic outlook improves but it still sits well below the level necessary for the market to normalize.

“Since we began collecting monthly National Housing Survey data in June 2010, we’ve seen substantial progress in consumer home price expectations and other key attitudinal measures as the housing recovery gained its footing,” said Doug Duncan, senior vice president and chief economist at Fannie Mae.

“Still, we do not expect to see ‘normal’ levels of new residential construction, in the region of 1.6 million new housing units per year, before the end of 2016, our original projection. Such a feat would require a pace of growth in housing starts not seen in decades.”

The survey indicates that consumer’s twelve month home price change expectation remained positive but dipped slightly compared to previous months, coming in at 2.4 percent. Further, 55 percent of consumers expect mortgage rates to increase in the next year.

“The uptick this month in the share of consumers expecting mortgage rates to go up and the accompanying decline in home price expectations reflect the pause of activity in the housing market so far this year,” said Duncan. “Despite recent improvement, we now expect an annual decline in existing home sales due to weak volume in the first four months of the year associated with the rise in mortgage rates mid-last year and the current dearth of supply of lower-priced homes.

There is reason to believe that activity could pick up in the second half of 2014. According to the survey, the share of consumers who said that they were worried about losing their jobs dropped to the lowest level recorded since Fannie Mae began collecting the data in 2010.

An improving expectation level is consistent with the improving employment landscape.  The newfound security could spur potential homeowners to stop putting off their next home purchase. They appear to be more confident in their ability to get it done. In fact, 52 percent of respondents to the survey thought it would be easy for them to get a home mortgage today.

A good second quarter is needed to ensure that confidence in the recovery continues to steadily improve.

Fannie Mae Confident of Continued Growth in 2014

February 28, 2014 In Daily Dose,Government,Headlines,News

The housing market’s cooler-than-expected first quarter should just be a temporary blip in a year of modest overall growth, according to Doug Duncan, chief economist at Fannie Mae.

Fannie Mae released Wednesday its latest economic forecast, which acknowledged that atypically harsh winter weather in much of the United States has slowed new home construction and sales in Q1 2014. But the report also reaffirms Fannie Mae’s position that the economy and housing markets will improve on 2013 growth by the end of Q4.

In an accompanying podcast to the February forecast, Duncan presented a mixed bag of growth and sluggishness in the housing market. A rise in mortgage rates, which Duncan expects to top out somewhere between 4.75 and 5 percent by year’s end, will slow existing-homes sales to about 1 percent growth this year, and maybe even less in Q1, he said.

Pending home sales plunged by 8.7 percent in December and were flat in January, leading to a rather guarded optimism that existing-home sales will show even tiny signs of improvement.

However, Fannie Mae is openly optimistic that sales of newly constructed homes should increase sharply this year, continuing last year’s trend toward more building and sales.

The caveat, Duncan said, is that the rise in new home sales is coming from a very low base. A healthy market, he said, would be about 1.7 million units built in a year. Fannie Mae predicts about 1.15 million units will be built in 2014, up from an overall 923,000 units built in 2013 (which itself was an 18.3 percent jump from 2012).

This is good news for the job market, as new construction means new jobs for builders and crews. Residential construction employment jumped by 17,000 jobs in January and should continue growing modestly in 2014, even if the numbers do not reach their pre-recession plateau of 2.5 million jobs, the report stated.

Overall mortgage volume, however, will likely be down this year, Duncan said. Higher mortgage rates are curtailing refinancing activity, even though an expected rise in mortgages for new home purchases should offset the drop a little, he said. Interest in mortgages peaked in May of 2013 and then fell by 20 percent, where it has stayed, according to the Fannie Mae forecast.

Despite a few broken bones in housing, however, Fannie Mae expects fairer weather to usher in gentle growth for the economy for the remainder of the year. The agency expects the economy overall to increase from 2.7 percent to 2.9 percent this year.