April 14, 2011 (Chris Moore)
Freddie Mac has released its Economic and Housing Outlook for April which anticipates a spring pick-up in home sales that the report attributes to encouraging employment numbers, continuing historically low mortgage rates and lower home prices, with the latter two contributing to the highest level in homebuyer affordability in 40 years.
Released by the Office of the Chief Economist, the report shows that current positive employment numbers might finally indicate that the labor market is starting to warm up. With four straight months of declining unemployment and over 1.3 million jobs gained from March of 2010 through March of 2011, the unemployment rate has finally fallen below the nine percent mark, currently resting at 8.8 percent.
Employment has been mixed as gains in service sector industries like mining and manufacturing has seen most of the employment spurt, while government employment, construction, and real estate remain weak.
Freddie Mac expects an accommodative monetary policy to continue to provide the housing market with low mortgage rates, though they predict rates will rise slightly through 2011. Refinancing activity is expected to decline due to rising interest rates.
Highlights of the report include:
– Unemployment declined for the fourth straight month to 8.8 percent, and net employment increased by 216,000 jobs.
– A projected 5 percent increase in 2011 home sales over 2010, on a calendar year basis.
– Despite weak and inconsistent monthly job gains for the real estate sector, real estate employment was up by 10,000 jobs since last November.
– Refinancing is likely to account for a much smaller share of loan applications later this year as borrowers who are “in-the-money” decrease and mortgage rates begin inching up.
– The share of adjustable-rate mortgages loans is projected to be 7 percent in 2011, compared to the 5 percent 2010 average in part because the level of fixed-rate mortgages rates are expected to rise relative to short-term interest rates.
Frank Nothaft, Freddie Mac, vice president and chief economist said, “”Expect to see a bit of spring in homes sales activity during the second quarter. Sales contract signings for existing homes were up in February, positioning the market for a bounce up going into the traditional homebuying season.”
You can view the whole report here.
Tags: Freddie Mac, Economic and Housing Outlook, homes sales, home affordability, low mortgage interest rates, declining unemployment, lower home prices, job gains