Thursday, January 20, 2005

Fannie Mae Sees Slowdown in Home Sales in 2005

Reuters



WASHINGTON (Reuters) - U.S. home sales should drop more than 7 percent in 2005 but still post the second-strongest year on record thanks to low mortgage rates and a pickup in jobs, Fannie Mae economists said on Friday.


New home sales should decline by 8 percent to total 1.10 million units, while existing home sales should fall slightly more than 7 percent to total 6.15 million units in 2005, according to the mortgage funder's annual economic outlook.

Sales will likely fall more in 2006 as mortgage rates climb and price appreciation on homes slows, hurting demand, Fannie Mae said.

Fannie said it expects a significant slowdown in home price appreciation. Fannie pegged a 3 percent to 3.5 percent increase in the national home price index issued by the Office of Federal Housing Enterprise Oversight over the next few years, down sharply from the 10 percent increase expected for 2004.

Fewer sales and refinancings, along with slower home price appreciation, should slow growth in mortgage debt outstanding, Fannie said. The company estimated a 9.4 percent increase in mortgage debt outstanding for 2005, down from the 12.4 percent to 12.6 percent rate of gain Fannie estimated for 2004.

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