NEW YORK (TheStreet) - The National Association of Home Builders says that the market for new single-family homes will return to near-normal production levels during the next two years as the Federal Housing Finance Agency allows Fannie Mae (FNMA) and Freddie Mac (FMCC) to ease lending standards for qualified residential mortgages.
The NAHB predicts that single-family home production will begin to surge in 2015 on stronger economic growth, low mortgage rates and pent-up demand, forecasting that single-family starts will increase 26% to 802,000 units in 2015 and another 37% to a normal annual rate of 1.1 million units in 2016.
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But several statistics and issues indicate that the optimistic outlook won't become a reality.
Disappointing third-quarter earnings from Fannie Mae and Freddie Mac cast a cloud above the possibility that the FHFA can authorize more risky mortgage lending by the mortgage giants.
Looking at data from Fannie Mae, single-family mortgage issuance declined 43% in the third quarter from a year earlier with issuance for home purchases down 15% and refinancings down a staggering 61%. Refinancings that require a Federal Housing Administration guarantee have a higher mortgage insurance premium, and that can be a deal-breaker.
Another determent to mortgage lending involves homeowners who are relocating and who are underwater on their mortgage. If their bank approves a short sale, the amount of the loan forgiven is now considered taxable income. That will put a down payment on new home mortgage in jeopardy.