U.S. housing is set to gain steam this year as a strengthening jobs market offsets the drag from an expected increase in mortgage rates, according to a Reuters poll released today. Housing activity has been sluggish since hitting a speed bump in the second half of 2013, with sales constrained by tight inventories and higher prices sidelining first-time buyers.
“We expect the housing market to improve this year. It is only a matter of time until the improved jobs market has a positive effect on the housing market. We are betting that first-time buyers return this year,” says David Nice, economist at Mesirow Financial in Chicago.
The survey forecast the S&P/Case Shiller composite index of prices in 20 metropolitan areas rising at an average of 4% this year and next. In November, the index had been forecast increasing at an average of 3.6% in 2015 and 3.1% next year.
Home sales, however, will likely remain sluggish early in the year before picking up in the second quarter and maintaining a brisk pace for the rest of the year. The middle months of the year typically are the busiest for home sales.
Sales of previously owned homes were forecast at an average annual rate of 5.10 million units in the first quarter, rising to 5.17 million units in the second quarter. That was below the 5.20 million-unit rate for the first quarter and 5.26 million units for the April-June period that economists had forecast in the November survey.
As previously reported by Daily Report, home sales in the eight-parish Capital Region for 2014 finished 3.2% higher than in 2013, aided by a strong December in which area sales jumped by 6.4% compared to the same month the previous year.
“There’s no reason to think that 2015 isn’t going to be another really strong year,” GBRAR President Donna Wolff said. “Our economy is really strong, our job market is extremely healthy and if interest rates stay low like they have been—and the predictions are that they may not really climb until the end of the year—I don’t see why 2015 won’t be even better than this year.”
The survey released today forecasts the 30-year mortgage rate averaging 4% this year and rising to an average of 4.58% in 2016. That compares to an average of 4.55% and 5.2% respectively in the November poll. The 30-year mortgage rate is currently averages 3.76%.
