Fannie Mae (OTC: FNMA) says it expects U.S. home sales to end 2021 a bit higher than they were the year before and the multiple economic effects of the coronavirus pandemic to dampen the market well into next year.
"A lack of homes available for sale, relative to demand, remains the key constraint limiting sales growth and driving home price appreciation," the government-sponsored enterprise (GSE) said this week in its Economic & Housing Outlook for September.
"Revisions to our home sales forecast were modest. We now expect 2021 total home sales to be 3.3% higher than in 2020, compared to a prior forecast of 3.1%," wrote the economists from Fannie Mae's Economic & Strategic Research (ESR) Group.
The ESR economists also adjusted their housing construction forecast to reflect their belief that some of the housing starts they had expected for later this year would be pushed into 2022.
Housing construction starts and affordability challenges
That reflects in the U.S. Census Bureau/Department of Housing & Urban Development housing starts report out this week, which shows single-family starts edging lower while multifamily starts surge.
Meanwhile, the National Association of Home Builders (NAHB) says builder sentiment is continuing the cooling seen since hitting a record peak last November, and that segment is now "stable."
As NAHB chief economist Robert Dietz said from his shop in this week's builder sentiment report: "The single-family building market has moved off the unsustainably hot pace of construction of last fall and has reached a still hot, but more stable level of activity, as reflected in the September HMI" (NAHB/Wells Fargo Housing Market Index).
"While building material challenges persist, the rate of cost growth has eased for some products, but the job openings rate in construction is trending higher," Dietz said.
Dietz also said affordability would remain a challenge in the coming months, driven by escalating construction prices and consumer demand.
Plus, interest rates. "The key additional risk to our housing forecast is a possible rise in mortgage rates precipitated by a more persistent increase in inflation or inflation expectations," the Fannie Mae economists write.
The Millionacres bottom line
Home sales hardly occur in a vacuum. The monthly report delves into multiple factors impacting the economy, including housing sales and financing as significant components.
The Fannie Mae analysts, for example, expect inflation to moderate but remain elevated: "In our view, the principal risks to our economic forecast come from the varying responses of consumers, the labor market, and policymakers to the evolving health risks created by the pandemic, as well as the related speed at which global supply chain disruptions are resolved."
While Fannie Mae stock may now be worth less than a buck a share, their two cents' worth on the housing market and the economy, in general, are worth noting by real estate investors looking at the big picture going forward. All those factors affect that core principle of economics 101: supply and demand.