There are many economists who predicted that the US gross domestic product would expand in real terms by 3 percent or better in 2014. Those forecasts depend on many things going right, including ongoing recovery in the nation’s housing market. But just when many economists expected the housing market to gather momentum due to broader economic improvement, the US housing market appears to be losing steam. Sales of existing homes fell 7.5 percent in March from a year earlier and to the slowest pace recorded in 20 months. Purchases of new homes fell 14.5 percent from February.
In the near term, sales momentum may deteriorate further. Mortgage applications to purchase homes have fallen 19 percent from a year earlier, which indicates that demand is slumping during a period that is typically the busiest for deals. According to Bloomberg, at the heart of the recent slowdown in housing market momentum is a combination of higher mortgage rates and higher home prices. Higher housing prices have also dampened demand for homes among investors.