US recovery falters as forecasters expect drop in sales
The two-year-old housing recovery in the United States is faltering. The Mortgage Bankers Association has lowered its forecast for combined new and existing home sales this year to 5.28 million - a decline of 4.1 per cent that would be the first annual drop in four years.
It also cut its prediction on mortgage lending to US$595 billion, an 8.7 per cent dip and the first retreat in three years.
Earlier bullish forecasts from the bankers' association, Fannie Mae and Freddie Mac have been sideswiped by rising home prices and an economy that is not producing higher paying jobs.
The share of those who said they planned to buy a home in the next six months plunged to 4.9 per cent last month from 7.4 per cent at the end of last year, according to the Conference Board, a research firm.
"The big housing rally wiped itself out because prices increased too quickly for buyers to keep up," said Richard Hastings, a consumer strategist at Global Hunter Securities. "The pool of eligible new buyers is collapsing" because of stagnant incomes and lack of credit.
The best-qualified homebuyers jumped into the market last year to grab near-record low mortgage rates that averaged about 3.5 per cent after delaying their moving plans during the housing slump, said Nariman Behravesh, the chief economist of IHS, a research firm.
The median price of an existing home rose 11.5 per cent last year, second only to 2005's 12 per cent gain, the highest on record, according to the National Association of Realtors. This year, price appreciation would slow to 5.6 per cent, it said.
According to banks, 30-year fixed mortgage rates would average 4.5 per cent, up from 4 per cent last year.
As prices climb, the ability of Americans with stagnant wages to buy homes wanes.
The median household income rose less than 1 per cent last year, according to Sentier Research. In April, the median income was US$52,959. When adjusted for inflation, that was almost 6 per cent lower than in June 2009, which marked the beginning of the economic recovery, Sentier said.
Three major housing forecasters - the bankers' association and government-run mortgage financiers Freddie Mac and Fannie Mae - began the year projecting an average home-sale gain of 10 per cent.
Last month, after monthly reductions in their estimates, Fannie Mae and the bankers for the first time projected an annual decline, amounting to less than 1 per cent. Freddie Mac this week lowered its home sales forecast to 5.4 million - a 1.8 per cent drop from last year.