Market Watch
Projecting 2014 housing market is a tough call, report shows
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Market Watch
Monday, April 21, 2014
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Freddie Mac has released its U.S. Economic and Housing Market Outlook for April, showing that recent data on the housing market continues to be noisy with mixed signals heading into the spring home-buying season.
"We're getting mixed signals as we start the spring home-buying season,” said Frank Nothaft, vice president and chief economist at Freddie Mac. “Tight inventory may pose a significant challenge for homebuyers in many markets across the country, which may result in higher home prices and sales being lower than expected. This is good news for those markets that have room to run on the house price appreciation front, but it's also going to increase the affordability pinch in many markets, especially along the country's East and West Coasts. Two indicators that are supporting local housing activity are rising consumer confidence and declining unemployment rates."
Outlook highlights include:
- New home construction is expected to increase by 18 percent, and house price appreciation should moderate to an annual growth of 5 percent in 2014.
- Home sales projections have lowered from 5.6 million to 5.5 million for 2014 primarily due to a slower than normal first two months of the year, which has resulted in a 4 percent reduction in annual originations.
- The housing market is being helped by an improving local employment picture. All 50 states saw declining unemployment rates, with 18 states experiencing at least a half percentage point reduction in their unemployment rate over the previous three months ending in February.
- Following the spike in interest rates last summer, consumer confidence had dipped a bit, but it is now tracking higher and was at the highest level since January 2008 in March.
- Expect the 30-year fixed-rate mortgage to continue its path of gradually rising higher and ending the year around 5 percent.
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