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Freddie Mac Dishes the Optimism in New Market Report

by Peter Thomas Ricci

frank-nothaft-freddie-mac-home-prices-housing-starts-optimistic

Freddie Mac dished out a hefty supply of optimism in its latest economic report.

“Optimism” was somewhat of a taboo term during the darkest days of the housing downturn, with any encouraging reports on the housing market earning skeptic glances and caustic asides.

Now, though, the situation is a little different. Housing starts, at an annual rate of 954,000 in December 2012, increased 37 percent over the year before, capping off the 15th consecutive month of yearly gains. Existing-home sales were up 9 percent in 2012, and new sales were up 20 percent. And finally, all national home price indices showed value gains.

Suffice to say, it’s a markedly different portrait for the housing market, and according to the most recent U.S. Economic and Housing Market Outlook from Freddie Mac, it’s one that will only improve in the coming months.

Freddie Mac – Housing Prone for Growth

The reason for Freddie’s optimism is simple. The housing market suffered its worst downturn since the Great Depression from 2008 to 2012, and because the market – even after that glorious 2012 – remains near historic lows, housing will be able to accomodate strong, sustainable growth into the foreseeable future. Some of Freddie’s projections include:

  • In 2012, residential fixed investment, or RFI, made its first positive contribution to GDP growth since 2005, adding 0.4 percent to GDP in 2012’s fourth quarter and 0.3 percent for all of 2012; Freddie expects RFI to expand to 0.5 percent for 2013.
  • Housing starts will continue their stellar comeback, increasing 22 percent in 2013 over 2012.
  • Housing affordability will remain competitive, and with prices increasing, scores of homeowners who were sidelined due to negative equity will be able to reenter the housing market and shop for new residences, pushing home sales 6.2 percent higher in 2013

Frank Nothaft – “Expect to See More Good News”

Frank Nothaft, Freddie Mac’s vice president and chief economist, said that going forward, we should expect more good news to come from the housing market.

“Across the nation, most local housing markets have room for sustainable growth, particularly in home construction and sales. As the broader economy heals, expect to see more good news, with house prices continuing their recent upward trend, and home sales and housing starts continuing to post strong growth rates … housing is now ‘showing some love’ by contributing to economic growth, perhaps by adding close to 0.5 percentage points to 2013 GDP growth.”

Do you share Freddie’s optimism? Wave your optimism flag in the comments section.

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