In Fannie Mae’s December release of their Economic and Strategic Report, they reported that the housing market “has turned the corner and a sustained recovery is under way.” Housing will be counted as a contributor to economic growth for the first time since 2005.
With decisions to be made about the fiscal cliff, growth is expected to be moderate for the remainder of the year in comparison with the previous quarter. On the positive side, however, it is clear that the housing market is making a slow and steady recovery.
The low mortgage rates that we have been experiencing for the past several of months will continue to play a large role in the recovery of the housing market through the New Year. The Federal Reserve will continue to purchase $40 billion in Mortgage-Backed Security bonds through the course of 2013 to ensure rates remain low. Fannie Mae predicts that over the span of 2013 mortgage rates will slowly increase to 3.5 percent.
Fannie Mae economists are predicting that in 2013 purchase applications will increase while refinance applications fall.
[quote]Given our expectations of continued improvement in housing starts, home sales, and home prices in 2013, we project that purchase mortgage originations will rise to $595 billion from a forecast of $518 billion in 2012. However, refinance originations should decline to $956 billion from a projected $1.3 trillion in 2012, resulting in a refinance share of 62 percent – a drop of 10 percentage points from the projected share in 2012. The Federal Reserve Board’s Flow of Funds showed continued de-leveraging in total single-family mortgage debt outstanding, which fell at a 3.4 percent annualized rate in the third quarter of this year. We expect that mortgage debt outstanding will decline an additional 1.0 percent in 2013, following a projected 2.4 percent decline in 2012.”[/quote]
While it is clear that there has been improvement, the housing market will continue to face its fair share of obstacles. One of the obstacles the housing market will continue to face will be the tight lending standards, which prevent credit-worthy borrowers from being able to purchase a home. Not allowing credit-worthy borrowers to purchase homes slows done the economic recovery.
Another obstacle the housing market is faced with is currently being discussed in the Fiscal Cliff debate. No longer allowing homeowners to deduct their mortgage interest payments from their taxes each year can further impede the housing market and economic recovery.
If you have any questions about the recovery of the housing market, do not hesitate to contact the mortgage experts at Prospect Financial Group, Inc. Consider purchasing a home or refinancing your existing loan will home prices and interest rates remain at records lows. Call us today at858-605-0952 or request a mortgage quote online.