Will U.S. Housing Win Gold in 2014?

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The U.S. housing market got off to a slow start in 2014 due to a lackluster job report. However, as long term rates have eased in the past month, some borrowers may have a chance to refinance, according to the U.S. Economic and Housing Market Outlook from Freddie Mac.

The labor market report from January showed only 113,000 jobs were created, less than the 194,000 per month averaged in the U.S. in 2013.

"Jobs and income growth are necessary for 2014 to turn in another gold-medal performance for the housing recovery," Frank Nothaft, Freddie Mac vice president and chief economist, said in the report.

Previous announcements regarding the Federal Reserve's tapering plans created fear of rising interest rates. However, 10-year treasury yields and fixed mortgage rates dropped about 0.3 percent between early January and early February, providing new life to the refinance activity in the mortgage market.

"It appears mortgage rates may have given the market a reprieve for a month or so and provided some borrowers another chance at refinancing, especially those folks that may be holding older mortgages," Mr. Nothaft said. "However, if rates continue their upward trend, it will be difficult for many families to purchase a home without seeing some income growth."

Homebuyer affordability has dwindled in the past year due to increasing home prices and interest rates, Freddie Mac reports.

Last week, the Mortgage Bankers Association reported a drop in mortgage applications.

The National Association of Realtors also reported falling home affordability as home prices increase.

In today's report, Freddie Mac estimates "more than $800 billion in securities with a coupon of at least 5.0 percent are in the money and would benefit by refinancing, based on 30-year mortgage-backed securities outstanding for Fannie Mae, Freddie Mac, and Ginnie Mae in January 2014."

Approximately half of the borrowers who refinanced held their previous loan for seven years or longer, according to the Freddie Mac fourth quarter refinance report.