The Mortgage Bankers Association lowered its forecast for combined new and existing home sales by 4.1 percent which would be the first annual drop in four years. The group also cut its prediction on mortgage lending volume for purchases to $595 billion, an 8.7 percent decrease 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 percent last month from 7.4 percent at the end of 2013, the highest in records going back 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 LLC 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. Mortgage application activity remains slow, with applications for home purchase mortgages roughly 15 percent below last year’s pace, and refinance applications almost 60 percent slower than a year ago.
This year, price appreciation probably will slow to 5.6 percent, NAR said. U.S. 30-year fixed mortgage rates probably will average 4.5 percent, up from 4 percent last year, according to the MBA forecast.
Three major housing forecasters -- MBA and government-run mortgage financiers Freddie Mac and Fannie Mae -- began the year projecting an average home-sale gain of 10 percent in 2014. In May, after monthly reductions in their estimates, Fannie Mae and MBA for the first time projected an annual decline, amounting to less than one percent. Freddie Mac this week lowered its 2014 home sales forecast by 1.8%.
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