Fannie Mae-No Politics (FNMA)

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Fannie Mae sees 2014 new-home sales hitting highest level in seven years
July 23, 2014, 11:41 AM ET

(This post has been updated to clarify that the most recent projection from Fannie Mae was an upgrade.)

Mortgage-finance giant Fannie Mae grew more optimistic this month about U.S. sales of new single-family homes, and now sees 2014 hitting the highest level in seven years, data released Wednesday show.

Fannie’s FNMA July housing-market forecast estimates that sales of new single-family homes will reach 486,000 this year — the most since 2007 — a bit higher than June’s estimate of 478,000, which would have been the greatest since 2008.

Despite the uptick in the July forecast, over the past year Fannie has slashed its outlook for new-home sales, showing just how disappointing the market’s been in 2014. Back in July 2013, federally controlled Fannie had expected 2014 sales of new single-family homes to hit 588,000.

Rising mortgage rates, a low supply of new homes and unusually poor winter weather each took a bite out of residential sales this year. It’s also been tough for many borrowers to meet lenders’ strict credit standards.

And builders themselves have narrowed the pool of potential buyers. Wary of putting up too many new houses, many large builders have opted to focus less on the volume of units that they sell, and have poured construction into high-demand areas that can command premium prices. This ratcheting up of prices means that fewer buyers can afford a new home.

On Thursday, the government will release its latest monthly sales snapshot for new single-family homes, and economists polled by MarketWatch expect to see the annualized rate drop to 475,000 in June from 504,000 in May.

Just how weak are home sales? Five years after the end of the recession, sales of new single-family homes still remain far below an annual average of more than 770,000 over the 20 years leading up to a 2005 peak, government data show.

But there’s good news, too. With a strengthening labor market, builders are feeling more optimistic about home sales, and could increase construction rates. A recent government report showed that construction permits for single-family homes — an indicator of future demand — grew throughout most of the country in June, hitting the fastest pace in seven months.

Still, building has been disappointing this year. Fannie dropped its outlook for 2014 single-family-home construction starts, lowering July’s forecast to 696,000 from a year-earlier expectation of 876,000.

Also Wednesday, Fannie cut its outlook for economic growth in 2014, saying it now expects fourth-quarter gross domestic product to rise 1.5% from the year-earlier period, compared with the company’s prior forecast of 2.1% growth.

–Ruth Mantell

http://blogs.marketwatch.com/capitolreport/2014/07/23/fannie-mae-slashed-forecast-for-new-home-market-over-past-year/