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DS News Webcast: Friday 4/10/2015

Despite a brutal winter and a slowdown in economic activity in the first quarter, Freddie Mac is sticking to its previous prediction that 2015 will be the best year for home sales since 2007, according to Freddie Mac's U.S. Economic and Housing Report for April 2015 released Thursday. The economic slowdown did not put a damper on Freddie Mac's overall forecast for housing, however. In fact, the title of the report, Great Expectations, indicated that analysts at Freddie Mac still believe 2015 will be the best year for housing since the pre-recession days.

Freddie Mac's April prediction for GDP growth of 2.6 percent is a slight decline from March's forecast of 2.8 amid disappointing incoming data from the first quarter and harsh winter weather. Despite a slight downward revision in the forecast for housing starts from March following a cold winter, pent-up demand is expected to bolster home sales for the remaining three quarters of 2015 – keeping Freddie Mac's projection for home sales this year at 5.6 million, the best year for home sales in eight years.

Researchers from the Federal Reserve Bank of Cleveland found that real wage growth has risen by only zero point 5 percent since the end of the Great Recession, way behind the pace of recovery following past economic downturns. The researchers say longer-term economic changes such as a labor productivity slowdown and the decline in labor's share of income – have been significant factors in depressing wage growth. The lack of growth in real compensation may hinder the housing market, since analysts have repeatedly said that robust wage growth is needed for the housing market to return to normal.

About Author: Jordan Funderburk


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