Although housing is beginning to stabilize, excess inventory and shadow
supply may hinder continued recovery, according to the April 2010 Economic
Outlook
released Monday by Fannie Mae's Economics &
Mortgage Market Analysis Group. Fannie Mae said
recent major housing indicators have been harsh. Housing starts fell in
February, led by a large drop in multifamily starts. In addition,
single-family starts fell slightly and have basically moved sideways during
the past 6 months. Hovering near an annualized level of 500,000,
single-family starts remained well above their record low reached in
February 2009 but are significantly below their record high of more than 1.8
million annualized rate recorded in February 2006. According to the outlook, lackluster homebuilding activity is one of the
reasons for a relatively modest recovery. However, given soft demand for new
homes, a much-below trend level of activity is necessary to restore balance
to the housing market. The fourth consecutive drop in new home sales in
February brought sales to another record low. Existing home sales posted their third consecutive drop in February, but
Fannie Mae said the near-term outlook is brightening, as augured by
improving leading indicators of home sales. Pending home sales, which
measure contract signings of existing homes, surged in February, and
purchase applications have risen nearly 25 percent in the last six weeks. As a result of these positive indicators, existing home
sales are projected to strengthen substantially in the second quarter. The homebuyer tax credit, set to expire later this month, is expected to
pull sales forward into the first half of this year. As a result, Fannie Mae
said sales will likely fall back in the third quarter. And if the labor
market improves substantially in the fourth quarter as anticipated, home
sales should rebound and begin a self-sustaining recovery without the help
of a tax subsidy. Even with an expected gain in March total home sales, sales for the first
quarter are likely to be much lower than originally projected, causing
Fannie Mae to downwardly revise the trajectory of sales going forward. For
all of 2010, Fannie Mae projects a 6 percent increase in sales, down from a
9 percent increase forecast in the March outlook and a 12 percent increase
projected in the February outlook. As for home prices, Fannie Mae expects to see more moderate declines this
year. However, the shadow inventory of homes continues to pose risks. In the
minutes from the March Federal Open Market Committee meeting, committee
members expressed concerns that the foreclosure rate could remain elevated
or even surge higher in coming quarters. Consequently, this could
potentially add supply to the already large inventory of vacant homes,
posing downside risks to home prices. However, Fannie Mae said two recent initiatives by the administration to
address rising delinquencies and stem foreclosures, if successful, will help
reduce shadow inventory. These include Federal Housing Administration
financing of underwater mortgages and an enhancement to the Home Affordable
Modification Program to address principal write-downs and unemployed
borrowers. It will be some time to determine how effective the programs will be in
reducing strategic defaults and the shadow supply of housing, but Fannie Mae
believes these measures will reduce downside risks to the housing market. Promote your business and
services online and offline, find out when our next mixer is.Connect with other successful
womenReal Estate Investing Education,
take advantage of today's real estate marketBuild Your Business-Drive Your Dream Promo
Code: legendwww.TotalSolutionsAlliance.com Connect with me on Facebook
Twitter LinkedIn
supply may hinder continued recovery, according to the April 2010 Economic
Outlook
released Monday by Fannie Mae's Economics &
Mortgage Market Analysis Group. Fannie Mae said
recent major housing indicators have been harsh. Housing starts fell in
February, led by a large drop in multifamily starts. In addition,
single-family starts fell slightly and have basically moved sideways during
the past 6 months. Hovering near an annualized level of 500,000,
single-family starts remained well above their record low reached in
February 2009 but are significantly below their record high of more than 1.8
million annualized rate recorded in February 2006. According to the outlook, lackluster homebuilding activity is one of the
reasons for a relatively modest recovery. However, given soft demand for new
homes, a much-below trend level of activity is necessary to restore balance
to the housing market. The fourth consecutive drop in new home sales in
February brought sales to another record low. Existing home sales posted their third consecutive drop in February, but
Fannie Mae said the near-term outlook is brightening, as augured by
improving leading indicators of home sales. Pending home sales, which
measure contract signings of existing homes, surged in February, and
purchase applications have risen nearly 25 percent in the last six weeks. As a result of these positive indicators, existing home
sales are projected to strengthen substantially in the second quarter. The homebuyer tax credit, set to expire later this month, is expected to
pull sales forward into the first half of this year. As a result, Fannie Mae
said sales will likely fall back in the third quarter. And if the labor
market improves substantially in the fourth quarter as anticipated, home
sales should rebound and begin a self-sustaining recovery without the help
of a tax subsidy. Even with an expected gain in March total home sales, sales for the first
quarter are likely to be much lower than originally projected, causing
Fannie Mae to downwardly revise the trajectory of sales going forward. For
all of 2010, Fannie Mae projects a 6 percent increase in sales, down from a
9 percent increase forecast in the March outlook and a 12 percent increase
projected in the February outlook. As for home prices, Fannie Mae expects to see more moderate declines this
year. However, the shadow inventory of homes continues to pose risks. In the
minutes from the March Federal Open Market Committee meeting, committee
members expressed concerns that the foreclosure rate could remain elevated
or even surge higher in coming quarters. Consequently, this could
potentially add supply to the already large inventory of vacant homes,
posing downside risks to home prices. However, Fannie Mae said two recent initiatives by the administration to
address rising delinquencies and stem foreclosures, if successful, will help
reduce shadow inventory. These include Federal Housing Administration
financing of underwater mortgages and an enhancement to the Home Affordable
Modification Program to address principal write-downs and unemployed
borrowers. It will be some time to determine how effective the programs will be in
reducing strategic defaults and the shadow supply of housing, but Fannie Mae
believes these measures will reduce downside risks to the housing market. Promote your business and
services online and offline, find out when our next mixer is.Connect with other successful
womenReal Estate Investing Education,
take advantage of today's real estate marketBuild Your Business-Drive Your Dream Promo
Code: legendwww.TotalSolutionsAlliance.com Connect with me on Facebook
Twitter LinkedIn
via Ping.fm
No comments:
Post a Comment