After Winter Chill, Time to Spring Forward
What's ahead for the housing market this spring?
The refinance boom of recent years
is on the wane. In the first quarter of 2013 refinances made up 71% of mortgage origination activity and have been declining since – down to 51% in the fourth quarter of 2013.
By comparison, mortgage originations for home purchases were up more than 20% last year. Looking forward, our Chief Economist Frank Nothaft anticipates that more than 50% of the mortgage market will be originations for home purchases by the end of 2014. A purchase dominated market hasn't happened in 14 years – not since 2000.
As we move to a purchase market, how does the overall housing market stack up? Housing is stronger today than at any point since the Great Recession began and hit bottom in 2009.
- Home sales are up 13% since their low point. Expect home sales to increase about 3% in
2014 as the purchase market continues to evolve.
- Housing starts are up 50% since they bottomed out. Expect almost 20% growth for this sector in 2014, which will begin to help ease tight inventories in many markets.
- House Prices are up 16% since their trough. Home value increases will continue their positive momentum in 2014, albeit at a more moderate 5% pace. And, in many markets, house prices are still below their peak 2006 levels.
Against this back drop, mortgage rates are rising but remain near historic low levels, keeping housing affordable in most parts of the country. Expect mortgage rates to continue rising gradually – about a half-percentage point during the year – to around 5% by year-end.
If improvements in job growth and income continue as Chief Economist Nothaft discusses in his March Economic & Housing Market Outlook – all these factors will help support the emerging purchase market.