More existing homeowners who have been paralyzed by falling house prices and job insecurity may finally be in the mood to move up and purchase a new home.
That is what the chief economist of the National Association of Home Builders says is happening as more and more housing markets are reporting improved conditions in terms of housing permits, employment and house prices.
“There are a lot of existing homeowners who have been waiting for two or three years or more for house prices to stabilize. And for their own job and economic outlook to stabilize,” chief economist David Crowe told NMN.
“I think that is where we are getting the current demand and I think that will continue,” he added.
The builders are forecasting that new home sales will jump 22% in 2013 to 447,000, following a 20% increase in 2012.
In making this 2013 forecast, Crowe is not betting that banks or other mortgage lenders will loosen their underwriting standards. He is betting that people who can qualify for a mortgage loan are realizing that it is a good time to sell their home and buy a new one.
This view of the market is borne out in a November survey by Fannie Mae that found 23% of respondents believe it is a good time to sell. That is a five percentage point increase from the October survey and the highest level since June 2010—when the company started the survey.
In addition, 51% of the respondents said it would be easy for them to get a mortgage, up from 41% in November 2011.
“This growing confidence in a housing recovery, in addition to other factors, may reinforce growing consumer optimism regarding the improving direction of the general economy,” Fannie chief economist Doug Duncan said.
Meanwhile, Freddie Mac economists expect single-family originations will decline 15% next year. Originations will total $1.7 trillion in 2013, down from $2 trillion this year as refinancings slow.
Freddie Mac’s chief economist Frank Nothaft sees refinancings at 60% of originations by yearend 2013, compared to 75% in 2012.
“A pickup in home purchase lending will probably be insufficient to offset the dip in refinance,” Nothaft said in a recent report.
Nothaft told NMN that refinancings will decelerate over the next 12 months. “There will be a dwindling pool of eligible homeowners who have a financial incentive and want to refinance as the year progresses,” he said.
Analysts at Keefe Bruyette & Woods are dourer. They expect lenders will originate $1.54 billion in single-family loans in 2013, down 9.4% from this year.
Home prices will rise by roughly 4% next year and credit availability should loosen up a little bit, according to KBW managing director Bose George. However, he is not bullish on purchase mortgage activity.
“We remain cautious on volume expectations for the year and expect modest growth of 5% to 10% in the purchase market,” the Dec. 10 KBW report says.
But the Home Affordable Refinance Program will have another strong year and fuel $150 billion in refis next year, down slightly from this year. “We expect HARP to continue boosting gain-on-sale margins,” the KBW analysts write.
