The inaugural Housing Forecast here provided perspectives on economic recovery, the public and private homebuilding sectors and the role of capital markets in today's housing landscape.

NEWPORT BEACH, CA-Consolidation and growth in the housing market in 2013 led to a banner year in homebuilder IPOs—the most active in 20 years, according to Tim Sullivan, Meyers Research practice leader, who moderated the inaugural Meyers Research 2014 Housing Forecast here last week. The sold-out educational forum and fundraising even raised $40,000 from ticket sales and sponsorships to benefit HomeAid America and provided various perspectives on the challenges and opportunities impacting the homebuilding industry in 2014.

Sullivan gave GlobeSt.com his takeaways from event on a variety of subjects, including the following:

  • New year, new challenges: “This year will yield a new set of challenges for the housing market and overall economy to overcome. A strengthening job market, improving economic conditions and accommodative Fed helped fuel a great year for stocks and housing in 2013. However, housing demand weakened toward the end of the year, mainly due to rising mortgage rates, but also other contributing factors like the government shutdown. While we expect the market to continue to climb higher in 2014, there will likely be more obstacles to overcome.”
  • The Fed’s new monetary policy: “Newly confirmed Fed Chair Janet Yellen will have to carefully navigate unchartered territory as the Fed seeks to taper their bond buying while also making sure there are no adverse effects on the economic recovery. Philadelphia Fed president Charles Plosser, who is known to be more hawkish, becomes a voting FOMC member this year, which may collide with the Fed’s accommodative policies at the current time.”
  • Economic and job growth:Jobs data released [last week] showed that hiring slowed in December with the economy adding only 74,000 jobs on a seasonally adjusted basis. Both the economy and labor market gained considerable traction in 2013, and that momentum will be a key determinant on whether housing continues to recover or not this year. The forecast for job growth on Zonda, which is a new iPad app serving the residential homebuilding industry, allows that 2014 will be the strongest year of job creation since 2000.”
  • New regulatory changes: “The Consumer Financial Protection Bureau adopted new Qualified Mortgages (QM) regulations. Temporary loan limit increases for FHA loans also expired at the end of last year. Extended unemployment benefits also expired and new healthcare reform starts going into effect.”

 

 

  • Fees and loan limits at Fannie Mae and Freddie Mac: “The mortgage giants were set to increase their base guarantee fee and make changes to other fees they charge that would have resulted in an increase of 0.14 percentage points on a 30-year fixed-rate mortgage. However, these planned fee increases have been temporarily delayed by Melvin Watt, who was sworn in on Monday as the new director of the Federal Housing Finance Agency. There has also been talk of cutting conforming loan limits at the mortgage giants as well. Both events would have a significant impact on the housing market.”
  • Mergers and IPOs:The New Home Co. LLC and City Ventures Inc. delayed plans to go public last year, but may still do so at some point this year.” (Update: Industry reports say that the New Home Co. announced Tuesday that it has commenced an IPO of 7,812,500 shares of its common stock. The IPO is currently expected to be between $15 and $17 per share, and the company expects to grant the underwriters an option to purchase up to an additional 1,171,875 shares of common stock to cover over-allotments. The company’s common stock has been approved for listing on the NYSE under the symbol “NWHM,” subject to official notice of issuance of the shares.) “There was also a lot of M&A activity in the builder space, which may continue as prime developable land becomes more scarce and builders try to achieve greater economies of scale.”
  • Mortgage rates:“Mortgage rates are expected to steadily climb throughout 2014, especially as the Fed takes the pedal off QE. Higher fixed rates mean that more borrowers will opt for adjustable-rate mortgages. Since this time last year, the ARM’s share of total mortgage-application activity has more than doubled from about 3% to close to 8%, according to data from the Mortgage Bankers Association. Slowly rising rates themselves should not have a significant negative effect on homebuyer demand if it is accompanied with a growing economy and job market. However, if rates are rising for other reasons like to combat inflation, while lending may tighten up due to stricter regulations, that poses a significant threat to the housing market.”
  • Housing and equity gains: “Gains for housing and equities in 2013 came in a relatively easy fashion. The easy money has come and is likely gone. Political differences, shifts in Fed policy, sharp gains in stocks and home prices over the past few years and the potential for slower economic growth in the US and abroad will require savvier decision-making.”