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Th e M Rep o RT | 51 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 Forecast Predicts minimal economic growth While Housing increases Fannie Mae expects Q2 bounce-back, similar to 2014. c onsumers' conservative financial behavior sug- gests modest economic growth for the re- mainder of the year, though the housing industry appears to be gaining momentum, according to Fannie Mae's Economic and Strategic Research Group's May 2015 Economic Outlook. Following a weak economic first quarter, continued negative economic fundamentals, including a strong U.S. dollar and the lingering effects of last year's oil price decline, have resulted in a downgrade in economic growth to 2.3 percent for all of 2015, down by 0.5 percentage points from the prior forecast. The projection for economic growth in 2015 is only slightly ahead of 2014's moderate pace of 2.2 percent. "Last year we saw a strong second-quarter rebound from a weak first quarter. We expect the same pattern this year, but a more muted bounce-back," Fannie Mae Chief Economist Doug Duncan said. "The drop in oil prices has led to a reduction in business fixed investment, particularly in the min- ing and energy extraction space, but hasn't yet translated to a significant increase in personal spending, with consumers remaining financially conservative by choosing to ramp up their savings or pay down their debt. Incoming data point to some strengthening of consumption for the second quarter." Leading indicators for the hous- ing sector have shown that despite the moderate economic growth predicted, housing may experience a strong season in the spring, ac- cording to Fannie Mae. In March, existing home sales rose to their highest level in nearly two years, although for Q1 existing home sales were off slightly from the previous quarter's total. Despite a slowdown in March, new single-family home sales ended the first quarter at their strongest pace in seven years. Other leading housing indicators that show a strong season may be ahead are pending home sales (increased in March for the third consecutive month) and purchase mortgage apps, which in early May jumped to their highest level in nearly two years. Strong home price accelera- tion has helped to improve equity positions and loan performance, foreclosure starts fell down to their long-run average of 0.45 percent, and the early-stage delinquency rate for single-family mortgage loans declined to their lowest level since 1972, indicating an improve- ment in the current quality of outstanding mortgage debt and tightening labor market conditions. "We also are seeing positive de- velopments in the housing space, supporting our forecast of moder- ate but broad-based improvement in 2015 compared to last year," Duncan said. "Purchase mortgage applications have moved up con- sistently for a couple of months, and while refinance applications have recently pulled back, the actual volume of both purchase and refinance originations earlier in the year came in stronger than we had projected. As a result, we have raised our mortgage origina- tion forecast to $1.46 trillion for the year." single-Family Home size increases in Q1 Median square footage jumps nearly 100 feet year over year. d ata from the Census Quarterly Starts and Completions by Pur- pose and Design and National Association of Home Builders (NAHB) analysis found that median single-family square foot area increased from 2,445 in Q 4 2014 to 2,521 square feet in Q1 2015. The average square foot- age for new single-family homes jumped from 2,677 to 2,736 for the first quarter this year. "The typical size of newly built single-family homes increased at the start of the year," said Robert Dietz, VP for tax and market analysis for NAHB. "The trend of increasing new-home size leveled off in 2014, but new-home size increased during the first quarter of 2015 with a decline in the volume of construction. As first- time buyers return to the market, typical home size is expected to trend lower." The average size of new single- family homes has increased 13 percent to 2,678 square feet, while the median size has increased 18 percent to 2,477 square feet, according to the analysis. In the NAHB's "Eye on Housing" blog, Dietz notes in his post called "New Single- Family Home Size Increases at the Start of 2015" that prior to the recession, the increase in single-family home size is consistent with the historical pattern coming out of recessions. Before and during the recession, typical home size usually drops as homebuyers cut back, and then high-end buyers, with fewer credit issues, return to the market like never before." "The trend of increasing new home size leveled off in 2014, but new home size increased during the first quarter of 2015 with a decline in the volume of construction." — Robert Dietz, VP, NAHB