Friday, February 13, 2015

Housing Market Disappointed In 2014, But This Year Could Be Better

This article was first published by Seeking Alpha on January 26, 2015.
By Sarfaraz A. Khan, Research Asst: Iffat Zehra

Last year, the U.S. housing sector did not provide the expected boost to the economy and failed to meet analysts' expectations. The industry witnessed a restrained level of house sales of existing and new single-family homes which was primarily due to elevated prices and sluggish growth in income.

As per National Association of Realtors, the share of first-time buyers in the market dropped to its lowest levels in 27 years. This was due in part to the complete lack of growth of inflation-adjusted real income for young adults since the recession coupled with the monumental rise in student loans by 166% over the last nine years, forcing these consumers to stay with their parents. The consumer's ability to save was also hit by the ever increasing rents whose growth rate has outperformed the inflation rate since 2001. The strict lending standards following the financial crisis also did not help. According to Fannie Mae, average FICO score for GSE-approved mortgages for Q3-2014was 16 points lower than the average score during 2009-12, but was still 28 points higher than 2007.

However, a recent report from the Commerce Department showing six-and-a-half-year record increase in groundbreakings for single-family homes, coupled with 4.5% increase in single-family permits to their highest levels in more than six years is an encouraging … read full article at Seeking Alpha