Fannie Mae Downgrades Outlook for 2014/2015

Fannie Mae economists downgraded its outlook today for 2014/2015, saying that too much momentum was lost during the first six months of the year.

Rising mortgage rates, bad winter weather and consumer “conservatism” are all hitting the housing market, said Doug Duncan, Fannie’s chief economist.

“With respect to housing’s contribution to growth this year, we have downgraded our outlook following the disappointing housing activity seen during the first half of the year,” Duncan said. “We currently estimate that 2014 will finish lower in total sales figures than 2013 – and that 2015, while stronger than 2013 and 2014, will not be the breakout year some are expecting.”

Specifically for August, the report says construction starts for single-family homes is expected to hit 642,000 in 2014, down about 8% from its July forecast of 696,000. Likewise, Fannie cuts its outlook for new single-family homes sales in 2014 by 11% to 431,000 from 486,000.

This outlook contrasts with actual builders, who, according to separate data released today, are the most confident they’ve been since the year started. Builders are more optimistic about current and upcoming sales of single-family homes, thanks to job growth and relatively low mortgage rates, among other factors.

Tuesday morning the government will report on housing starts for July, and economists polled by MarketWatch expect construction to recover, jumping to an annual rate of 975,000 from June’s surprisingly slow pace of 893,000, which was a nine-month low.

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