Fannie Mae Report: Housing Market Transitions to a New 'Normal'

Most real estate watchers are in agreement that markets are getting better, but whether or not we can say that means things are returning to 'normal' remains to be seen. We're seeing a recovery of sorts, but a closer look at the stats reveals numerous anomalies in the state of the real estate market's health that would seem to suggest that we're far from a return to 'normal' conditions.

© Paul Fleet ' Fotolia.com

Or could it just be that our vision of 'normal' itself is undergoing a transition? This is the question that Fannie Mae recently tried to answer'

Fannie Mae's recent report Transition to 'Normal'? points out that a large degree of uncertainty remains over both the housing market and the larger economy.

'Our forecast is that 2013 and 2014 will exhibit below-potential economic growth. This is despite the fact that we expect the housing rebound will continue and that the economy will benefit from the gradual increased growth of U.S.-based manufacturing, as well as the expansion of domestic energy production.'

Here's a quick summary of the main points highlighted in Fannie's report:

Interest rates to stay low

Despite some arguing to the contrary, Fannie Mae is of the opinion that rates will remain at their current low level for quite a few years at least. The mortgage giant predicts that rates will remain lower than 4.2% until at least the end of 2014.

Less refinancing

Fannie Mae is predicting that the recent boom in refinancing will come to a close, saying that 2013 is likely to be the first of several transitional years as finance markets revert to a 'normal' balance between refinance and purchase-related activity.

Cost of FHA loans to rise

It's likely that more costs will be assigned to loans under the Federal Housing Administration.

Foreclosure rates to fall

With both homeowners and banks eager to pursue alternatives to foreclosure, such as short sales and refinancing deals, it's likely that we'll see foreclosure rates fall even further.

More housing starts

Fannie Mae boldly predicts a 23% rise in the number of housing starts, which would be 60% greater than 2010, when the construction industry hit rock bottom. We've already seen evidence of this in the number of new housing permits being granted, although Fannie Mae says that it'll take until 2016 before we start seeing housing starts reach sustainable levels.

Mortgage originations to rise

Finally, Fannie Mae is expecting mortgage originations to pick up substantially this year in light of its predicted improvements in the housing market, rising to $642 billion from last year's forecast of $518 billion.

The full report from Fannie Mae can be accessed here.