Fannie Mae Sees "Woefully Slow" 2012
Fannie Mae’s November Economics andrnMortgage Market Analysis released this morning cites the depressed sentimentsrnfrom the Conference Board consumer confidence index and the Fannie Mae NationalrnHousing Survey as one cause for concern regarding the development of thernhousing market. </p
Fannie Mae’s economists are projectingrnthat existing home sales in 2011 will be about 4.94 million, little changedrnfrom 2010 and that 2012 sales will be only slightly higher, reaching 4.96rnmillion units. Sales of new homes arernexpected to total 306,000, down 6 percent from 2010 and then rise to 321,000 salesrnin 2012.</p
Homebuilders are more optimistic andrnhomebuilding activity picked up in September but this was driven primarily byrnmulti-family construction which, the report says, tends to be volatile. The low level of construction has reducedrninventory down to 6.2 months which is not out of line with historical averagesrnbut “even with this lean inventory, builders find it difficult to compete withrndistressed properties in the existing home market, which reports supply ofrnaround 9 months.” Fannie Mae forecastsrnthat the oversupply of existing homes will continue over the coming years asrndistressed properties continue to come on the market. Total housing starts in 2011 are estimated atrn595,000 and at 654,000 in 2012 with single-family starts representing 423,000rnand 443,000 units.</p
The primary measures of home prices fellrnoff of earlier gains in August and are expected to trend lower for the rest ofrnthe year because of weak demand and the inflow of distressed houses. Responses to the Housing Survey indicate thatrnconsumers expect prices to fall even further which can become a self-fulfillingrnprophesy. Median existing home prices are projected to finish 2011 at $165.40rnand 2012 at $163.20. Median new homernprices for the two periods are expected to be $221.80 and $218.90.</p
Single-family mortgage originations are projectedrnto decline to $1.30 trillion in 2011 from an estimated 1.69 trillion inrn2010. Fannie Mae expects thatrnoriginations will decline still further in 2012 to $988 billion as an expected reductionrnin refinancing offsets increases in purchase applications. The refinancing share of originations isrnexpected to drop to 53 percent from the current level of 75 percent. Total single-family mortgage debt outstandingrnwill decline by an additional 1.6 percent in 2012 following a 2.3 percent fallrnin 2011.</p
Given the lack of improvement in thernhousing market despite record low rates, Fannie Mae expects housing to continuernas a focus of policymakers and sees indications that the Federal Reserve isrninclined to provide additional support. rnFederal Reserve Governor Tarullo has stated that he would like to seerngreater priority given to more Fed purchases of mortgage-backed securities (MBS)</band Fed Chairman Beranke has indicated that this is "a viable option." Fannie Mae anticipates that such purchases willrnplay a role "if the Fed decides to expand its balance sheet again."</p
Beyond housing, Fannie Mae sees therncontraction in inventories and the slow gains in employment as indications therneconomy will likely skirt recession in 2010 but return to a slower growth pathrnin 2012.
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