""Freddie Mac"":http://www.freddiemac.com has released a new ""economic and housing market outlook"":http://www.freddiemac.com/news/finance/docs/May_2011_public_outlook.pdf. The GSE says it's looking ""better, but still not good enough.""
[IMAGE]While Freddie's economists see some ""positive signs"" in terms of homebuyer affordability and low mortgage rates, extended unemployment dampens the forecast.
Data ""released last Friday"":http://dsnews.comarticles/nations-unemployment-rate-rises-to-90-2011-05-06 by the U.S. Labor Department show that the private sector added 268,000 jobs in April, the most in five years. Minus the 24,000 jobs lost in the public sector, the economy added a net 244,000 jobs last month, the job market's best showing in almost a year.
The April unemployment rate, though, edged up to 9.0 percent from 8.8 percent in March, partly reflecting discouraged workers who have re-entered the labor market, the GSE explained.
The unemployment rate is still twice what it was before the recession began. Freddie Mac says the economy needs to add over 250,000 new jobs per month, on a sustained basis, to reabsorb all the jobs lost since the recession.
The GSE says it anticipates a pick-up in economic growth in the second half of this year, however unemployment is expected to linger above the 8 percent mark until the third quarter of 2012.
Freddie reports that the average duration of unemployment was just over 38 weeks in April. The company says the large number of workers unemployed for a long period of time remains the predominant force behind seriously delinquent mortgages.
[COLUMN_BREAK]Frank Nothaft, Freddie Mac's chief economist, commented, ""While the labor market is moving in the right direction, it still has a long way to go before the unemployment rate moves sharply lower. And ditto for seriously delinquent rates on mortgages.""
Freddie Mac is projecting the rate of seriously delinquent mortgages â€"" which was 8.6 percent at the end of 2010 -- will likely trend lower during 2011, but continue to remain at extraordinarily high levels for an extended period.
According to the U.S. Treasury, unemployment is also the biggest trigger event leading to re-default for borrowers that have received permanent loan modifications through its Home Affordable Modification Program (HAMP).
Freddie Mac says its outlook for mortgage loan performance implies that U.S. house-price indexes have not bottomed out just yet, although these metrics are close to their nadir.
Nothaft adds that a relatively large supply of distressed properties entered the market during last winter, a period when homebuyer demand is seasonally weak, and has caused further erosion in national indexes.
Freddie Mac's index of U.S. home prices declined 2.8 percent between December 2010 and March 2011, in part reflecting the large volume of distressed transactions in the housing market.
""We expect some firming in U.S. price indexes during the spring, perhaps even a pickup, with some weakness toward year-end and a bottoming next winter,"" Freddie said in its latest forecast.
Still, the GSE does see some positive signs in the housing market, namely homebuyer affordability remains extraordinarily high because of low mortgage rates and house prices that are well off their cyclic peak.
In addition, Freddie notes that contract signings for existing home sales are up, presaging a pickup in activity as the housing market enters the spring selling season.
The GSE expects home sales to be up about 5 percent in 2011 compared with 2010.