August 20, 2014 View entire issue of ANO         Close 

Freddie Mac: Housing Market on Path to ‘Normal’
The nation’s economy is stabilizing and the housing market is expected to return to a more normal state driven by fundamentals such as labor market gains and unemployment rates, Freddie Mac reported Aug. 13 in its U.S. Economic and Housing Market Outlook for August. 

Highlights from the report include: 
  • The latest forecast has economic growth averaging 3.3 percent in 2015 and the unemployment rate continuing to gradually decline. If that holds true, household formations should pick up and housing starts are projected to increase 28 percent over 2014's pace to 1.3 million starts in 2015.
  • The U.S. Census Bureau reported that over the past four quarters, net household formations totaled only 458,000, compared with long-term projections by the Joint Center for Housing Studies of 1.2 to 1.3 million per year.
  • The number of persons-per-household has increased by 2.6 percent since 2005, rising from 2.69 to 2.76 persons-per-household. If the persons-per-household had held steady over that period there would be an additional three million households today.
  • The monthly mortgage payment-to-rent ratio for the U.S. is near the lowest it’s been in more than 35 years. Even with some increase in house prices and interest rates, the ratio will remain relatively low.
  • After several years of weakness, the labor market is picking up steam, having added 230,000 net new jobs on average for the first seven months of this year.
“We are getting closer to a more normalized economy, and now we are expecting to see housing driven by fundamentals, and in fact, we've already seen this in some markets,” Frank Nothaft, Freddie Mac vice president and chief economist, said in the report. “The economic growth and labor market gains we saw in the second quarter of this year are projected to continue, strengthening household formations and the housing sector. A recovering housing sector will sustain the rally in homebuilding despite likely increases in long-term interest rates. Increased construction activity will further accelerate the improvement in labor markets and fuel even more household formations and more housing demand. The result is an economy that gradually recovers back towards its potential.”

Read Freddie Mac’s August 2014 U.S. Economic and Housing Market Outlook.

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