Fannie Mae predicts robust housing market activity in second half of year

July 29th, 2015

Fannie Mae expects home sales and construction to increase in the second half of 2015.

Fannie Mae recently released its economic and housing forecast for the second half of 2015, and the government-backed mortgage insurer is optimistic about growth for the U.S. real estate industry. Here are the key points from the report:

Home sales expected to continue their climb
Homebuyer demand is high, sparking improvements for home sales. Fannie Mae anticipates this activity will continue.

"We expect to see strong sales, lean inventories and rising confidence through the rest of the year, which should support increased homebuilding activity and give an added boost to economic growth," said Doug Duncan, Fannie Mae chief economist.

That statement echoes findings from the most recent existing-home sales data from the National Association of Realtors, which showed gains for sales, declining inventory and rising prices. The latest new residential sales report from the U.S. Departments of Commerce and Housing and Urban Development also supports Fannie's prediction, revealing an 18.1 percent year-over-year increase in new-home sales in June.

"We expect existing- and new-home sales to climb by approximately 5 and 25 percent, respectively, and total mortgage originations to rise approximately 24 percent to $1.46 trillion, with a refinance share of 47 percent," Duncan continued.

Skills shortage not predicted to hurt construction
In line with Fannie's thoughts on inventory are expected improvements for construction of new homes. The homebuilding industry is currently short on skilled labor, but Duncan said that issue shouldn't inhibit production. Housing starts are predicted to reach an average of 1.2 million units in the second half of 2015.

The National Association of Home Builders (NAHB) also is optimistic about future production and new-home sales. Responding to the June new residential construction report, David Crowe, NAHB chief economist, noted how limited access to land and labor slow single-family home production. However, in a separate NAHB statement about the new-home sales data, Chairman Tom Woods explained builders report steady buyer traffic, which could prompt more home construction.

Consumer spending anticipated to go up
The job market continues to improve, and Fannie said this trend will encourage more consumer spending. Rising household net worth, incomes and consumer confidence are not only predicted to contribute to economic growth, but also could prompt more Americans to purchase homes. The mortgage insurer said consumer spending in addition to other factors will result in a 2.8 percent boost for the economy.