Home sales expected to pick up

After starting slow, home sales are expected to pick up the rest of 2014, according to the Freddie Mac U.S. Economic and Housing Market Outlook for July. The report showed varying data results for the housing recovery as we head into the final half of the year. While sales are expected to increase, home sales forecast remains at 5.4 million, a slippage of around 2 percent compared to 2013. Existing sales are predicted to be 3 percent lower, while new home sales are expected to rise by 10 to 15 percent.

The report predicts that new housing construction will increase nearly 14 percent in 2014 compared to last year. Housing starts for 2014 are forecast to be about 1.05 million dwellings with multifamily accounting for about one-third.

"Although the economic news for the first half of 2014 has been bittersweet, there is good news to share as we head into the latter half of summer,” says Frank Nothaft, Freddie Mac vice president and chief economist. “In particular, employment was up by nearly 1.4 million during the first six months and this will bolster household formations, resulting in positive gains most immediately for the rental housing market and then, longer term, for single-family home sales. The multifamily rental market has led the rest of the housing sector into recovery, and about one-third of housing starts in the first quarter were for multifamily rental apartments. There's no question the single-family recovery is moving slowly, but it continues to doggedly press forward and we are cautiously optimistic." 

The employment picture has gotten better, with a net monthly growth of 231,000 nonfarm jobs for the first half of 2014. Stronger employment will translate into more household formations and a pickup in rental housing demand, with future gains for the single-family sales market.

Single-family mortgage originations are down following a lackluster spring home buying season and a sharp drop in refinance. For this reason, the mortgage originations forecast for 2014 was reduced by 6 percent to $1,175 billion.

Freddie Mac predicts fixed mortgage rates to rise gradually throughout the year in keeping with the Fed’s plan to hold interest rates low. The average 30-year fixed mortgage rate should end the year still near historic lows at around 4.4 percent, according to the organization. 

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