Housing Chartbook: May 2014 Analysts’ Outlook

11 June 2014

Housing Chartbook: May 2014 Analysts’ Outlook

11 June 2014

Commentary from Senior Economists with Wells Fargo Economics Group

The lack of a rebound in home sales this spring has reinforced our view that there was more than
harsh winter weather behind the recent slide in home sales and mortgage applications. New home
sales and home construction are still likely to rise this year, but the gains will be modest, and the
forecast trajectory for future years has been scaled back. Conditions are gradually improving, and
a handful of markets where economic growth has been strong, such as metro areas with large
energy and technology sectors, are enjoying robust demand and seeing increased building
activity. Most markets, however, are finding themselves wildly out of balance, with home prices
having been pulled higher by an influx of investor purchases and exceptionally tight inventories
well ahead of any fundamental improvement in demand. Residential development also remains
sparse, which has sent new home prices soaring and severely curtailed affordability.

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