Fannie Mae sees lower home sales in 2014

Mortgage giant Fannie Mae forecasts fewer home sales in 2014, citing conservative consumers.

Harsh winter weather hampered housing starts and sales in the first half of the year, but some economists expected a rebound in the second half. Yet Fannie Mae, the government-sponsored mortgage company, says it expects "only minor improvement."

"The outlook for the housing market has deteriorated as housing activity appeared to have lost momentum at the end of the second quarter," the company said in a news release. Although housing still is expected to contribute to economic growth this year and in 2015, "it does not appear likely to be a growing driver of growth going forward."

The company's forecast raises doubts about a sector that was expected to be a key pillar of stronger economic growth.

Fannie said it expects 995,000 housing starts this year, down from its July forecast of 1.05 million and up only modestly from last year's 925,000. It expects 1.2 million starts in 2015, down from its previous estimate of 1.3 million.

The company projects new and existing home sales will total 5.3 million this year, lower than its July forecast of 5.5 million, which was slightly below the 2013 total. Sales next year are expected to total 5.1 million, vs. its previous estimate of 5.2 million.

Average 30-year fixed mortgage rates are 4.12%, below the year-ago average of 4.46% but higher than 3.45% in April 2013. The following month, the Federal Reserve began signaling that it intended to wind down bond purchases that were holding down long-term interest rates, pushing up borrowing costs across the economy.

"Additionally, on the demand side, there appears to be a conservatism among consumers and their willingness to take on big-ticket purchases, such as homes," Fannie said in the release.

The mortage giant, however, raised its 2014 forecast for U.S. economic growth to 1.9% from 1.5%. It said stronger consumer spending and bigger job gains should push economic growth to 3% at an annual rate in the second half of the year from below 2% in the first half.