Freddie Mac released its July 2011 economic outlook yesterday where it projected that the U.S. housing market will perform similarly to the overall U.S. economy for the rest of 2011, with home sales above 2010’s pace by 3% to 5%.
The GSE's economists believe that despite the current economic “soft patch”, a “double dip” in home sales and apartment rental markets is unlikely. They expect single-family home sales to increase in 2011.
The outlook report stressed that macroeconomic factors are still dragging on the housing market. Unemployment rose in June for the third consecutive month, reaching a six-month high of 9.2 %, while the number of those who have been unemployed for more than six months continues to be high.
“Following June's labor market report, households are naturally concerned about their financial futures, which is being reflected in the housing market,” said Freddie Mac Senior Economist Frank Nothaft. “And after clear weakness in national price metrics through the first quarter, there are glimmers the second quarter will likely show gradual improvement over time."
However, the report did warn that price metrics will likely decline in 2H11 with the volatility resulting from the high levels of distressed home sales in the market.
Freddie Mac economists cited this general uncertainty as the reason why home sales remain low despite the current record levels of homebuyer affordability and historically low mortgage rates.
Conversely, the rental housing market has shown significant improvement with increased financing availability and strong price appreciation. Freddie Mac economists think this recovery is a direct result of ‘modest’ expected home-value appreciation that is “encouraging potential first-time buyers to stay in rental housing”.
The National Multi Housing Council reported a tightening in rental market conditions in most metropolitan areas. It also said that the debt and equity financing is more available compared with three or six months ago. Meanwhile, the National Council of Real Estate Investment Fiduciaries’ Apartment Property Price Index has risen 15% since the 1Q11.