US Housing Recovery Faltering
The Mortgage Bankers Association on June 19 lowered its new and existing home sales forecast for the year to 5.28 million — a decrease of 4.1% that would be the first annual drop in four years.
The industry group also cut its prediction on mortgage lending volume for purchases to $751 billion, an 8.7% decline and the first retreat in three years.
Bullish forecasts in early 2014 from MBA, Fannie Mae and Freddie Mac have been sideswiped by rising home prices and an economy that isn’t producing higher paying jobs. The share of Americans who said they planned to buy a home in the next six months plunged to 4.9% last month from 7.4% at the end of 2013, the highest in records dating to 1964, according to the Conference Board, a research firm in New York.
“The big housing rally wiped itself out because prices increased too quickly for buyers to keep up,” said Richard Hastings, a consumer strategist at Global Hunter Securities in Charlotte, North Carolina, who predicted the slowdown eight months ago. “The pool of eligible new buyers is collapsing” because of stagnant incomes and lack of credit, he said.
The best-qualified homebuyers jumped into the market last year to grab near-record low mortgage rates that averaged about 3.5% after delaying their moving plans during the housing slump, said Nariman Behravesh, chief economist of IHS Inc., a research firm based in Englewood, Colorado.
The median price of an existing home gained 11.5% last year, second only to 2005’s 12% increase, the highest on record, according to the National Association of Realtors. This year, price appreciation probably will slow to 5.6%, NAR said.
As prices climb, the ability of Americans with stagnant wages to buy homes wanes.
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|By Kathleen M. Howley|
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