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The Federal National Mortgage Association has released its US housing market forecast for the remainder of 2015 and all of 2016.
Although the association, which also goes by the name Fannie Mae, said in the report that projected economic growth for the rest of the year looks “less upbeat,” it pointed out that there have been “some positive improvements.”
Notably, Doug Duncan, Fannie Mae’s chief economist, cited increasing home sales as a positive trend alongside low inventory which has been driving prices up. Annually, the median prices for both new and existing homes are expected to continue rising through 2016.
This year, Fannie Mae is banking on the median existing home price finishing the year at $217,000, up from $208,000 in 2014. That number is expected to climb to $226,000 at the end of 2016, as the median new home price hits a projected $298,000 this year — up from $283,000 last year — and $310,000 for 2016. With supply running short of demand recently, those who already own homes have bolstered equity, the report noted.
However, this factor is not a panacea for the housing market because it also acts as a hurdle for first-time buyers who make up a smaller share of the market even as US home sales hit an eight-year high last month.
“We hold by our previous comments that income growth still needs to strengthen, particularly for younger households,” said Duncan in a statement.
Fannie Mae expects mortgage rates will rise through 2016, but only gradually. This quarter they project the five-year adjustable rate mortgage will stay flat at 2.9 percent followed by a one to three percent increase in Q4. In the final quarter of next year, Fannie Mae forecasts the rate will reach 3.46 percent, but this projected increase won’t be enough to curb mortgage demand, according to Duncan.
Total existing home sales, which include single-family homes, condos and co-ops, will increase seven percent year-over-year in the final quarter of 2015 to a seasonally adjusted annual rate of 5,286,000, Fannie Mae predicts. In Q4 next year, expect to see things cool down to a 2.7 percent increase year-over-year, with sales hitting a projected 5,430,000 units.