Posts by Frank E. Nothaft
Frank E. Nothaft is Freddie Mac’s chief economist. Nothaft is responsible for forecasts, research and analysis of the macroeconomy, housing and mortgage markets. He is also involved in affordable lending analysis and policy issues affecting the housing finance industry.
Freddie Mac's latest U.S. Economic and Housing Market Outlook concludes that the nation's economy is gradually getting back to a more normal level of activity, and therefore we expect to see housing demand and supply increasingly driven by fundamentals – in fact, we've already seen this in some markets.
We, like many, expected more out of housing so far this year. Existing home sales were down 6 percent while new home sales were unchanged during the first five months of 2014 compared with the same time last year. Single-family housing construction was lackluster too with building permits slipping 2 percent and housing starts up a meager 1 percent over this same five-month window. One of the few bright spots in housing activity occurred for multifamily rentals: starts of buildings with five or more apartments jumped 16 percent during January through May compared with a year ago, and vacancy rates on rental apartments tracked by Reis dipped to 4.0 percent in the first quarter, down from 4.4 percent a year earlier, and the lowest recorded by the firm since 2000. That's great for the rental industry, but also means your rent is going up.
It has been more than seven years since the beginning of the deepest housing recession since the Great Depression. As housing activity fell, nervous speculation took off in the media and industry about when (if ever) housing would get back to normal. Given the pickup in sales, new construction, and home values over the past couple of years, it’s fair to ask if we’re there yet: is the U.S. housing market back to a normal range of activity with a good balance between demand and supply forces?
Remember last year when the 15-year fixed-rate mortgage rate was an unbelievable bargain at just over 2.5 percent, the lowest in recorded history and about three-quarters of a percentage point below a 30-year fixed-rate loan? So everyone buying a house was getting a 15-year loan, right? Nope. Thirty-year fixed-rate mortgages dominated – accounting for more than 85 percent of the home-purchase loan market in 2012.