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Wednesday, November 19, 2014

Home sales heading to fastest pace since 2006



WASHINGTON (MarketWatch) — Sales of previously-owned homes next year are set to hit the fastest pace since 2006, as jobs, wages and the broader economy pick up, the National Association of Realtors forecast Friday.

In 2015 existing-home sales will likely hit 5.3 million, an 8% jump from 2014’s expected final tally of 4.9 million, NAR said.

“We’re starting to see more workers showing a willingness to quit, which usually signals they’re becoming more mobile and confident they can find a higher paying job,” said Lawrence Yun, NAR’s chief economist. “The impact of rising interest rates on affordability will be minimal as long as job creation keeps pace.”

Sales took a hit this year from bad weather, a relatively low number of homes on the market, and quickly escalating prices and mortgage rates.

One potential fly in the upcoming home-sales ointment is the difficulty that would-be borrowers have in getting a mortgage. Federally controlled mortgage-finance giants Fannie Mae FNMA, +0.48% and Freddie Mac FMCC, -0.50% are working on new programs that aim to expand the pool of borrowers, such as by bringing in more first-time purchasers (this group’s share of home sales recently hit a 27-year low).

Housing-market analysts, however, are skeptical about the extent to which government efforts, such as backing low down-payment loans and clarifying rules for lenders, can open the credit tap.

“We see this change as incrementally positive at best for single family housing demand because [Fannie and Freddie] have focused their mortgage purchases on the top quartile of credit scores for several years now,” Sterne Agee analysts wrote in a research note. “Mortgage originators are concerned about lawsuits over past lending practices fielded by a state or city attorney general from markets with high foreclosure rates.”

Even if lenders do become willing to loan to more types of borrowers, there could still be a demand problem, Fannie and Freddie’s regulatory chief said Friday. Mel Watt, director of Federal Housing Finance Agency, described a laundry list of demand issues, such as young people delaying family formation and choosing to rent, burdensome student loans, and trouble saving enough for a down payment.

“While things will not change overnight, it is my hope that many creditworthy individuals and families who are currently renters — but have the ability to pay a mortgage and become homeowners — will have the opportunity to pursue homeownership and will decide to do so,” Watt said.

On a bright note, there was good news Friday about potential young home buyers. Employment among young people hit the highest rate in almost six years, getting this group closer to be in a position to ramp up their home buying.

 

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