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Taking the Temperature of the Market

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temperature_thermometerRecently, Freddie Mac released its U.S. Economic and Housing Market Outlook for January showing that four of the key housing indicators are all moving in the right direction, which bodes well for an ongoing recovery.

“As we start 2014, the housing recovery continues its steady pace,” says Frank Nothaft, Freddie Mac vice president and chief economist. “House-price gains will likely moderate from last year’s pace but rise about 5 percent in national indexes. Home sales, as well as other key indicators, continue to trend in the right direction, although in some markets we are seeing the sales recovery strengthen while many others remain weak.”

Outlook Highlights and First Quarter Projections

• December’s unemployment rate of 6.7 percent remains stubbornly high. It may take another two years until labor market gets back to full employment.

• Mortgage delinquency rates at 5.88 percent have been nearly cut in half from their peak, but they are still very high from their long term normal average of approximately 2 percent.

• From 1999-2006, mortgage payments on a hypothetical 30-year fixed-rate mortgage would have increased by 50 percent more than income growth. Currently, payment-to-income ratios are only 60 percent of the level we had in 1999 suggesting room for continued house price growth.

• When measured against the single-family housing stock, historically home sales have averaged about 6 percent of the stock at an annual rate. During the housing boom, home sales increased up to about 9 and then plummeted down to around 4 percent. With home sales at a 5.8 million pace in 2014 this rate should rise up to 5.7 percent for 2014.

 For more information, visit www.FreddieMac.com.

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