Mid-Year Report Indicating Sluggish Housing Market

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In its June 2014 US Economic & Housing Market Outlook, Freddie Mac provided evaluation of the performance of the market during the first half of the year. Based on the figures, the analysts compiling the report defined the market as sluggish. It did not perform as well during the first half of 2014 and during the first half of 2013. There are concerns that the sluggishness will remain.

During the first half of 2014, the sales of existing homes were 7% lower compared to the same period of 2013. The sales of new homes went down by 3%. Both the housing starts and the building permits during the first four months of this year were lower compared to the levels of 2013. Only the multifamily home starts increased by 15% on an annual basis. Still, the latest housing starts data for May 2014 indicates that the number of multifamily home starts is going down as investors start looking for more lucrative opportunities while the building of single-family homes shows minimal increase.

Due to the poor performance of the housing market during the first half of the year, economists were forced to lower their annual home sales forecast from 5.5 million units to 5.4 million units. The sales are estimated to be lower than those for 2013.

The limited inventory is a major issue for the housing market nationwide and locally as well. Many existing homeowners are still underwater while others want to keep the lower mortgage rates which they secured over the past few years. The low inventory keeps home prices up and forces many potential buyers and especially first-time home buyers to stay out of the market.

The mortgage applications went down by 13% from the first half of 2013 to the first half of 2014. Even though now the mortgage rates are back down from their peak levels in August 2013, the demand for homes remains low.

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A major improvement in the housing market is expected only after the economy stabilizes completely.
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