Freddie Mac has released its U.S. Economic and Housing Market Outlook for February showing that while the housing sector is recovering, the level of housing activity is still near historic lows. And in many markets, especially those hardest hit, there is room for sustainable growth because of record high homebuyer affordability; a factor of relatively low house prices, mortgage rates and modestly rising income. For the first year since 2005, residential fixed investment (RFI) made positive contributions to GDP growth, adding 0.4 percent to growth in the fourth quarter and 0.3 percent for the year. Expect RFI to contribute upwards of 0.5 percent for 2013 as a whole.
"Across the nation, most local housing markets have room for sustainable growth, particularly in home construction and sales," said Frank Nothaft, Freddie Mac vice president and chief economist. "As the broader economy heals, expect to see more good news with house prices continuing their recent upward trend, and home sales and housing starts continuing to post strong growth rates. The macroeconomic recovery though 2011 helped to forestall further erosion in the depressed housing market. In return, housing is now 'showing some love' by contributing to economic growth, perhaps by adding close to 0.5 percentage points to 2013 GDP growth."
Projecting housing starts in 2013 will increase to 950,000 units or about 22 percent higher than 2012 levels. While most metro areas saw substantial run-ups in prices during the boom, well above income growth, the subsequent market correction was in many cases more severe. The level of affordability in most markets suggests a continued improvement in home prices, and strong growth in sales and construction.
Existing home sales are expected to pick-up as the house price recovery allows homeowners who have been forced on the sidelines by negative equity to get back into the market.