Fannie Mae recently published its Economic Forecast and Mortgage Market Analysis for April. While Fannie’s economists note that some sectors of the economy are improving, it is still fairly bearish on the housing market, noting that declining home equity, foreclosures, excess supply and little demand will continue to restrain the sector this year.
The predictions are not good for those of us in the mortgage industry, as Fannie believes that the average rate on a 30-year fixed rate mortgage will be 5.4 percent by the end of 2011. Additionally, mortgage originations are expected to fall from $1.53 trillion in 2010 to $1.04 trillion in 2011.
The report also says that housing remains the “Achilles Heel” of the recovery:
“The abundant availability of distressed sales remains a particular hurdle for the new home market, which has been persistently depressed since the end of the homebuyer tax credit. New home sales plunged in February, setting a fresh record low since the inception of the data in 1963 and are now nearly 9 percent below the previous record low set in August 2010. The number of new homes available for sale was flat in February, remaining near record lows. The inventory of new homes has not posted a monthly increase since January 2010. Despite the historically low inventory, the new home market continues to face a significant imbalance amid sluggish demand. With the slowest pace of sales on record in February, the months’ supply rose to 8.9 months, the highest reading since August 2010. While the months’ supply has improved substantially from a record high of more than 12 months at the start of 2009, it remains much higher than its long-term average of about six months.”
The abundant housing supply and lack of demand has caused home prices to decline continually since the end of the first time homebuyer tax credit last year. The FHFA purchase-only home price index has dropped in 7 of the last 8 months. The CoreLogic Home Price Index has dropped for nine straight months and the S&P-Case/Shiller Home Price Index has declined for seven straight months . The Fannie report cites a study of economists (the MacroMarket Survey), which predicts a 1.4 percent decline in home prices in 2011. Notably, the same survey predicted only a 0.2 percent decline in prices back in December, so participants have become decidedly more pessimistic on the housing market in recent months.
While there’s not a ton of new information in this report, it does confirm what we (and many others) have been saying for months: the housing market is not likely to turn around in the near future.
Loading ...
kellier
April 21, 2011 @ 12:29 am
Of course banks want fannie and freddie gone. Then they have no competition and can put wholesale out of business as well as the fact that they hold 40% of the money supply. American borrowers would become just another hostage to the 5 major banks. Fannie and freddie need to be made solid and we need a separate strong government sector af TRUE and realistic rated securities. 5 ratings with corresponding risk factors.
“I dont want to be a rich woman in a poor country”. KR
Reply
DC ReaItor Reply:
April 22nd, 2011 at 7:57 am
Fannie and Freddie need to be made solid? Are you freakin joking?
They and my lying co-workers created this mess. Housing prices are grossly inflated and you can attribute that to fannie and freddie. The pain associated with getting prices back to affordable levels will be unbearable for you.
Reply