Freddie Mac has released its U.S. Economic and Housing Market Outlook for July, recapping the first half the year and giving a look down the road on expectations for the markets in the second half. Seasonally adjusted, single-family house prices were up approximately five percent in national indexes in just the first half of 2013. The blistering pace in house prices is unlikely to continue, but rather moderate and grow at a rate closer to three to four percent in the second half, for a total gain of eight to nine percent for the calendar year. Recent Taper Talk has led to a jump in interest rates with the 30-year fixed-rate mortgage (FRM) up a full percentage point since mid-May. Expect rates to gradually move higher, ending the year around 4.6 to 4.7 percent.
"The housing recovery keeps chugging along despite the recent market hysterics around Taper Talk which caused mortgage rates to jump over the past month. We won't know the immediate impact on the pop in mortgage rates for another couple months," said Frank Nothaft, Freddie Mac vice president and chief economist. "However, we don't expect them to stall the housing recovery because demand is strong, supply is limited and housing affordability remains strong in most markets for most families."
The labor market added 1.2 million net new jobs through June, marking the best first half of the year since 2005 with construction contributing 100,000. Expect this same pace to continue in the second half. Through the end of May, home sales were on their best first-half year pace since 2007. Existing home sales were up over 10 percent compared with the first five months of 2012, and new home sales were up 29 percent. In the second half of the year, expect sales (new and existing) to be up an additional two percent and starts up 12 percent relative to the first half.
In the first quarter of 2013 about 65 percent of newly completed apartments were rented, up substantially from 2009 when absorption rates were about 50 percent. Good fundamentals have driven the renaissance in apartment construction: Through the first five months of 2013 multifamily housing starts were near a 300,000 annual pace, about the same as the average pace during 1997-2006.