Friday , 2 June 2017
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2014 Sales Outlook Reduced Again

For the fourth time since January, Freddie Mac has lowered its forecast for home sales this year from 5.6 million in January to 5.31 million in August.  It also reduced its estimate of total mortgage originations  from $1,750,000 to $1,150,000.

Freddie kept its projection for 2014 price appreciation at 5 percent, not quite as high as Fannie Mae’s forecast of a 5.6 percent increase in the FHFA Purchase Only Index but higher than a recent survey of  104 economists that predicted prices would rise only 4.6 percent year-over-year by the end of 2014 and expected the pace to slow in each of the next four years. The most optimistic group of panelists predicted a 5.6 percent annual increase in home values this year, on average, while the most pessimistic predicted an average increase of 3.7 percent.

In an optimistic statement Freddie Chief Economist Frank Nothaft said “Economic growth and labor market gains we saw in the second quarter of this year are projected to continue, strengthening household formations and the housing sector. A recovering housing sector will sustain the rally in homebuilding despite likely increases in long-term interest rates. Increased construction activity will further accelerate the improvement in labor markets and fuel even more household formations and more housing demand. The result is an economy that gradually recovers back towards its potential.”

However, Nothaft noted that despite the recent improvements in the labor market, household formation still remains very slow: the Census Bureau reported that over the past four quarters, net household formations totaled only 458,000, compared with long-term projections by the Joint Center for Housing Studies of 1.2 to 1.3 million per year.


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