Fannie Mae sees slowdown in home sales in 2005
reuters.com
WASHINGTON, Jan 21 (Reuters) - U.S. home sales are expected to drop more than 7 percent in 2005 but still post the second-strongest year on record thanks to low mortgage rates and a pickup in jobs, Fannie Mae (FNM) economists said on Friday.
After four consecutive record-setting years, new home sales should decline by 8 percent to 1.10 million units, while existing home sales should fall slightly more than 7 percent to 6.15 million units in 2005, according to the mortgage funder's annual economic outlook.
Sales will likely fall more in 2006 as mortgage rates climb and house prices rise more slowly, dampening demand, Fannie Mae said.
David Berson, Fannie Mae's chief economist, said he expects a significant slowdown in home price appreciation. Fannie forecast a 3 percent to 3.5 percent increase in the national home price index issued by the Office of Federal Housing Enterprise Oversight over the next few years, down from the 10 percent increase expected for 2004.
Berson called 10 percent price appreciation "unsustainable."
Economic growth will be roughly unchanged around 3.9 percent in 2005, with core inflation around 2 percent, Berson said.
He also said he expects the Federal Reserve to raise the target fed funds rate to 3.75 percent by the end of 2005. Those increases, Berson said, were fully priced into the market.
Long-term fixed-rate mortgages should average between 6.25 percent and 6.33 percent in 2005, Berson said.
Adjustable-rate mortgages will account for 20 percent to 30 percent of total mortgages this year, down from about 33 percent to 37 percent of the market in 2004, Berson told reporters in Washington.
Fewer sales and refinancings, along with slower house price gains, should slow growth in mortgage debt outstanding, Fannie said. The company estimated a 9.4 percent increase in mortgage debt outstanding for 2005, down from the 12.4 percent to 12.6 percent rate of gain Fannie estimated for 2004.
. |
