Friday, August 29, 2014

Economists Grow More Optimistic About Housing’s Outlook

The strengthening job market has more economists gaining confidence about the direction of the housing market over the next two years, according to a newly released Reuters poll of 29 housing analysts, including investors and economists.
What’s more, economists expect home resales to continue to inch up in 2015, reaching 5.29 million by the second quarter of 2015.The economists surveyed expect existing-home sales to increase to 5.25 million units in the first three months of 2015. Currently, existing-home sales stand at 5.09 million. In May, the economists surveyed had expected much slower gains at 5.1 million expected in the first quarter of 2015.
The job market is why most of the economists are starting to change their tone about housing’s outlook. For the last six consecutive months in July, employers added more than 200,000 jobs.
"Low mortgage rates and improving labor market dynamics should remain conducive to gradual growth in the housing sector," Gennadiy Goldberg, a strategist at TD Securities, said in a recent note to clients.
The housing analysts surveyed expect mortgage rates to rise more slowly than they originally thought in May. Still, they do expect rises are looming with expectations that the Federal Reserve will slowly begin to increase its benchmark interest rate around the middle of next year. The Fed has held the benchmark interest rate near zero since 2008.
The economists polled expect the 30-year, fixed-rate mortgage to rise to 5.25 percent in 2016. That is a slight drop from the 5.68 percent average they had predicted in the May poll.
The 30-year fixed-rate mortgage is currently averaging 4.10 percent, according to Freddie Mac.
Nevertheless, the economists say the housing recovery likely won’t be derailed by a gradual increase in mortgage rates.
"If a rise in mortgage rates comes with a stronger economic recovery, the housing market will be able to absorb it," Alexander Lin, an analyst at Bank of America Merrill Lynch, told Reuters.

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