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Fannie Mae Says There's a New Housing "Normal"


Fannie mae

Fannie Mae Says There's a New Housing "Normal" - It seems as though it’s time for us to realize that the housing market has changed forever.  Unfortunately, we need to get used to a new “normal” that involves a small level of growth that probably won’t escalate quickly any time soon – at least, that’s what Fannie Mae says.

Fannie Mae just made some bold predictions about the direction of the housing market and home loans stating that the growth rate in the next year is unlikely to improve. In fact, Fannie Mae says that Americans should get used to this new “normal” for the next few years. The Federal National Mortgage Association (FNMA) or more commonly known as Fannie Mae, released a report with their predictions about what Americans should expect over the next several years when it comes to their loans and mortgages.

What exactly are they saying?

According to their report, Fannie Mae says that the U.S. housing market has been on a “modest growth path” since 2009, and that this slow recovery should be considered the “new normal”. Unfortunately, they see bickering in Washington as a problem for future housing growth. Specifically, the report states, “The fiscal cliff and ongoing debt ceiling debate, which are likely to suppress consumer spending in the first half of 2013, continue to present potentially strong headwinds to meaningful growth activity.”

It’s not all bad news though. Fannie Mae’s report also predicts that interest rates will remain low, that there will be a significant increase in new home construction, and that foreclosure rates will continue to fall. Although there are experts that disagree with some of these findings, if the study proves to be true, interest rates will remain below 4.2% well into 2014. That prediction is in line with the Federal Reserve’s timeline for the Quantitative Easing Program, which is designed to keep interest rates low for the next couple of years.

Another positive forecast is that people won’t have to refinance their mortgages as often as they did in the past. Fannie Mae’s predictions include a smaller number of people refinancing their home loans because there will be a better balance of refinance and purchase-related activity. Fannie Mae also estimates a 23% increase in housing starts. This prediction is backed up by an increase in permits granted at the end of 2012. Fannie Mae does point out, however, that it will take a few years before we start seeing housing starts get back to where they were before the economy crashed. A very positive prediction in this report is fewer foreclosures. Foreclosure rates have dropped dramatically in part because the economy is steadily improving, but also because people more than ever are trying to avoid it – thanks to things like short sales and other programs.  Fannie Mae predicts that as short sales become more popular, and as banks come up with additional alternatives for their borrowers, the foreclosure rate will continue to decrease.

Although Fannie Mae addressed many of the issues, what it all boils down to is that there still remains uncertainty and plenty of guesses when it comes to the housing market. The steady, but slow increase could, however, mean good things for the future – as long as you’re willing to accept the new “normal”!

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