Real Estate Outlook: Freddie Mac Predicts Positive Recovery
by Kenneth R. Harney
Could we be heading for a "double dip" in the economy, taking us back into recession, as some Wall Street analysts predict? Could the Federal Reserve's planned departure from the mortgage securities market send home loan rates spiking upward, and knock the wind out of the housing recovery?
Those are scary questions. But last week one of the country's most accurate economic and housing forecasters came out with projections for the balance of the year that basically said: None of that scary stuff is going to happen.
Frank Nothaft, chief economist for mortgage investor Freddie Mac, sees what he calls "a very steady, quarter to quarter growth" pattern ahead, with no "double-dip" mini-recession hurting real estate, and only minor increases in interest rates. Notehalf's econometric models point to expansion of the U.S. economy in the 3.3 to 3.5 percent range, as measured by the Gross Domestic Product (or GDP) through 2011. In economic terms, that's sort of a "not too hot, not too cold" scenario that helps keep interest rates low and inflation under control.
Nothaft forecasts average 30-year mortgage rates around 5.6 percent by the end of the year - up from today's rates but still in historically low territory and not high enough to seriously constrain housing demand or sales. In fact, Nothaft expects total housing sales - that's existing resales plus sales of newly constructed homes - to be at a nearly 6 million annual rate by the end of 2010, and even higher in 2011.
One sobering area in his projections, however, is prices. On a national average basic, his models point to a pattern of relatively flat prices for the coming year as the result of continuing high foreclosures, short sales and other distress situations in parts of central California, Nevada, Arizona and Florida. But Nothaft emphasized in an interview with Realty Times last week that "the national numbers tend to obscure what's happening in regional and local markets" that are not heavily burdened with distress sales, and where underlying economic demand already is producing higher prices and multiple bids on homes for sales.
In a separate forecast last week, economists at the Mortgage Bankers Association predicted employment gains of 75,000 to 80,000 a month on average nationwide for the balance of the year - a sharp contrast to the 400,000 and higher monthly losses typical last year.
Bottom line here: Look for steady, moderate improvements ahead, nothing spectacular, but good enough to keep real estate headed in the right direction.
Source: Realty Times Online March 22, 2010
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