February 2017 - Making Millennials Move

TheMReport — News and strategies for the evolving mortgage marketplace.

Issue link:

Contents of this Issue


Page 53 of 67

52 | TH E M R EP O RT O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST DATA Homebuyers Lose Confidence in Housing Market Despite homebuyers reporting lower confidence in the housing market, consumers reported rising confidence in personal finances and the direction of the nation's economy, according to NAR. C onfidence in the market is waning among would- be homebuyers, but at the same time, consumer enthusiasm and the country's economic direction rose, according to the Housing Opportunities and Market Experience survey for the fourth quarter from NAR. Approximately 78 percent of those surveyed in Q 4 2016 said it was a good time to buy a home, compared with 82 percent in the Q 4 2015, according to NAR. A sharp decline in confidence was experienced among renters, with 57 percent in Q 4 2016 believing now is a good time to buy com - pared with 68 percent in Q 4 2015. "Rents and home prices outpac- ing incomes and scant supply in the affordable price range has been a prominent headwind for many prospective buyers this year," said Lawrence Yun, NAR's Chief Economist. "Making matters worse, the unwelcoming reality of higher mortgage rates since the election is likely further holding back confidence. Younger house - holds, renters and those living in the costlier West region—where prices have soared in recent months—are the least optimistic about buying." Even with the headwinds fac - ing buyers, existing-home sales sold at an annual pace of 5.42 million in 2016, the best year for existing-home sales since they sold at an annual clip of 6.47 million in 2006. Yun said the pace of existing-home sales is expected to bump up slightly in 2017 to 5.52 million while the median home price continues its upward climb (forecasted to rise by approximate - ly 4 percent), and ditto for mort- gage rates (up to approximately 4.6 percent by the end of 2017). "Although the economy is expected to continue to expand with around 2 million net new job creations, existing home sales are expected to see little expansion next year because of affordability tensions from rising mortgage rates and prices continuing to outpace income growth," said Yun. Despite fewer prospective buy - ers expressing confidence in the market, the survey showed that more consumers in Q 4 2016 expect the nation's economy to improve under the new administration. However, consumers under 44 living in urban areas with higher incomes expressed the most enthu - siasm for the economy next year (54 percent compared to 43 percent in Q 3). The share of consum- ers who believe their personal financial situation will get better in the next six months rose from 58.6 percent in Q 3 up to 59.8 percent in Q 4, according to NAR. Yun said he hopes the optimism for the economy along with job gains and more millennials reaching the prime home buying age will fuel growth in housing this year. "Some would-be sellers may be reluctant to move up or trade down—especially if they've refi - nanced in recent years," said Yun. "That's why it's extremely neces- sary for homebuilders to step-up their production of homes catered to buyers in the affordable price range. Otherwise the nation's low homeownership rate will struggle to shift higher in 2017." Fannie Mae Predicts 'Pedestrian Growth' This Year Despite strong economic indicators, Fannie Mae anticipates slow economic growth in 2017, in part due to "policy uncertainty." F annie Mae suggested 2017 is going to be an- other year of pedestrian growth for the economy and housing despite confidence hitting its highest level in years heading into 2017. Fannie Mae's December Economic and Housing Outlook showed that long-term interest rates are still on the climb and that more aggressive fed funds rate pro - jections stemming from December's Federal Open Market Committee meeting are likely to push mort- gage interest rates to their highest point in more than two years. This, Fannie Mae said, will create "headwinds for housing." Home price appreciation has remained strong, and bullish investors have helped push equity prices higher, buoying household net worth and providing support to consumers, the report stated. Rising oil prices have also helped reduce drags on the energy sector. However, despite these positive developments, Fannie Mae cited "policy uncertainty" as its reason for projecting a cool 1.8 percent growth in 2017. Should the predic - tion hold up, it would make 2017 the third straight year of such modest growth. "The tenor of our forecast effectively remains unchanged: signs of cautious consumers this quarter, rising interest rates, the renewed increase in the U.S. dollar to a 14-year high, and heightened uncertainty in the political sphere suggest conservatism in our outlook," said Fannie Mae Chief Economist Doug Duncan. "While

Articles in this issue

Archives of this issue

view archives of TheMReport - February 2017 - Making Millennials Move