Fannie Mae Predicts Sales Dropping Due to Rising Prices

Fannie May economists recently stated that sales in 2014 are predicted to fall 3.2% below last year's level of 5,519,000 units sold, according to Real Estate Economy Watch.

Experts believe this new outlook is, in part, due to the somewhat disappointing housing activity in the beginning of the year. However, it appears that Fannie continues to be "bullish" about the housing market's capacity to consolidate its price gains this year.

“The August outlook supports our expectation that the economy will grow in the second half of the year at slightly above trend and push full-year growth into positive territory, albeit still weak by historical standards,” said Fannie Mae Chief Economist Doug Duncan.

“We expect the forecast will get a boost from consumer spending, which appears positive in the current quarter given the improving trends in personal income and hiring. Additionally, consumers surveyed in our July National Housing Survey reported being more optimistic about their personal income and expenses despite a more pessimistic view about the direction of the economy. However, how healthcare spending will affect consumers poses a significant uncertainty given the substantial revisions on the healthcare front.”

“The impact on mortgage rates from the market’s expectation that the Federal Reserve would soon start tapering their securities purchases, combined to some degree with the weather effect in the first half of 2014, led to very little seasonal growth in housing. In the first six months of the year, total sales have run below last year’s pace. Additionally, on the demand side, there appears to be a conservatism among consumers and their willingness to take on big-ticket purchases, such as homes,” said Duncan.

“We currently estimate that 2014 will finish lower in total sales figures than 2013 – and that 2015, while stronger than 2013 and 2014, will not be the breakout year some are expecting,” he said.

 

Prices themselves are expected to rise 5.6% in 2014 (after the 7.6% increase in 2013). Even though sales are slow, prices are still expected to rise another 4.5% in the following year.

What do these figures mean for you? Don't hesitate to send us an email or give us a call! We'd be happy to chat.

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