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Continued from Page 43 44 | Th e M Rep o RT o r i g i nat i o n s e r v i c i n g a na ly t i c s s e c o n da r y M a r k e t ANALYTICS the latest 1. Improving economic fundamentals: After coming off the starting line in a stagger, the U.S. economy bounced back from a weak first quarter and showed the strongest growth seen in years. The Bureau of Economic Analysis reported that third-quarter growth came in at an annual rate of 5 percent—a reversal of Q1's contraction of 2.1 percent. Meanwhile, monthly payroll numbers continue to look encouraging, inspiring more confidence among Americans. 2. Continually low mortgage rates: While interest rates remained above the rock-bottom lows seen in 2013, they're still averaged around 4 percent for 30-year fixed-rate products, even as the Federal Reserve takes a less dovish approach to monetary policy. Realtor.com attributes the trend to global economic weakness, along with actions by the European Central Bank and other Asian banks to battle recessionary conditions. 3. Decelerating home price gains: While ongoing price increases had some commentators worried about a new housing bubble in the making, the large-scale slowdown of home price growth has brought the trend more in line with historical performance. 4. Declining distressed sales: Foreclosures and short sales continued to fall throughout the year—and while that might have put a drag on total sales volumes, the share of non- distressed transactions grew over last year, indicating a healthier market. 5. Investor pullback: Going hand-in- hand with the drop in distressed sales, the retreat of investors from the housing market created more room for traditional buyers, driving down competition and putting a cap on prices. On the other hand, there remain a few headwinds that are likely to be a problem in the next year: 1. Tight credit standards and limited mortgage availability: While there's been some debate on the issue of loosening lending criteria, mort- gage data throughout last year indicates credit standards have seen little change, preventing many households from taking advantage of low interest rates. By Realtor.com's estimate, the "tight spread between approved and declined FICO scores shut out nearly half of the potential population this year." 2. Tight inventory: While inven- tory has seen some progress at the national level, supply has still failed to keep up with demand. In many markets, the months' supply of new and existing homes remains under the normal balance between a buyer's mar- ket and a seller's market. 3. Low levels of first-time buyers: According to recent data from the National Association of Realtors (NAR), the share of first-time homebuyers fell last year to its lowest in close to three decades. On the bright side, "the first-time buyer share is showing signs of modest improvement by the year-end," noted NAR Chief Economist Lawrence Yun. As fed- eral agencies push to expand low- cost housing options, advocates hope to see a greater presence from first-timers in 2015. 4. Record levels of renters and climb- ing rent prices: The national home- ownership rate continues to look weak at 64.4 percent, indicating more adults are renting rather than buying. Unfortunately, as rent increases outpace home price growth, analysts are con- cerned that today's renters are unable to save to become tomor- row's buyers. 5. Lack of recovery in homebuilding and weakness in new home sales: The new home market has struggled over the course of 2014, and despite increasing confidence levels, homebuilders aren't break- ing ground on as many homes as some would hope—especially in the lower price tiers. americans' economic confidence grows, But Housing doubts Persist With more Americans taking a hit to personal income and fewer expecting personal finances to improve, nagging apprehension over homebuying remains. a mericans are growing more and more cheery when it comes to the overall state of the economy, but their feelings regarding the housing sector remain tepid, according to survey results released in January. Out of a group of 1,000 Americans polled in Fannie Mae's December National Housing Survey, 41 percent said they now believe the economy is "on the right track," up from 36 percent in November, the company reported. While the share of consumers say- ing the economy is headed in the wrong direc- tion is still high at 51 percent, it continued to trend downward in December, marking five con- secutive months of declines. While opti- mism—likely spurred by continuing job growth—is on the rise, the number of Americans whose household income has fallen off significantly over the last year picked up (hit- ting 14 percent), and a declining share expect their personal finan- cial situation will improve in 2015. In contrast to December's slight- ly more positive economic atti- tudes, consumer sentiment toward the housing market remained subdued for another month, with the share of Americans saying now is a good time to purchase a home falling to 64 percent. By the same token, only 61 percent of consumers said they would buy a house if they were going to move anytime soon—a survey low. "Our survey results show that consumer housing sentiment has, on average, been moving sideways amid some improvement in the general view of the economy," said Doug Duncan, SVP and chief economist at Fannie Mae. Given the kind of long-term com- mitment homeownership represents, Duncan said he isn't surprised that the housing sector is lagging behind the rest of the economy in terms of consumer confidence. "Many prospec- tive homebuyers want to be certain that their personal finances can with- stand potential downside risks to the economy," he said. On one bright note, the share of consumers who think it would be easy to get a mortgage today increased to match the all-time survey high of 52 percent, while the share saying it would be difficult to get a loan dropped to a low of 44 percent. The spread between the two groups is the widest in the survey's history, Duncan said. "While this is a welcome signal, softness in consumer attitudes that drive housing demand will make for a subdued recovery and should persist absent more meaningful and sustained gains in household income," he added. "our survey results show that consumer housing sentiment has, on average, been moving sideways amid some improvement in the general view of the economy." — Doug Duncan, Fannie Mae HLP