Are you thinking about refinancing your home this year? Take a breather and listen to what the expert economists have to say about mortgage rates, housing starts, and new household creations in 2014.
Let’s take a look back.
When our economy was going through the housing boom, the U.S. was producing 1.4 million additional households every year.
In the aftermath of the Great Recession, there is a significant pent-up demand to form households and even to build homes. At least 3 million fewer households formed over the past five years than would normally have been expected. During this period, many college graduates were forced to double-up or move in with their parents.
However, we have come an incredibly long way since then. Over the past year, there has been a significant revival of single-family home production.
What does this mean for 2014?
Housing will continue its climb toward higher ground this year. According to NAHB Chief Economist David Crowe, consumer confidence has returned to pre-recession levels and year-over-year household formations are on the rise. In fact, they are now averaging 620,000 compared to just 500,000 during the housing downturn.
There will be an upward pressure on mortgage rates this year, but don’t worry – it’s not enough to harm housing affordability. As mortgage rates gradually rise, fewer homeowners will look to refinance. Also, purchase originations are expected to increase as the overall housing market strengthens.
“As we move into the 2014 home buying season, it will be a market dominated by home buying originations rather than refinance originations,” says Frank Nothaft, vice president and chief economist at Freddie Mac. “This will be the first time since 2000 that purchase originations will dominate the market.”