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This Year’s Housing Forecast Looks a Lot Like 2006

Forecast One BHInconsistencies in the economy during the first quarter have not dampened Freddie Mac’s forecast for housing for the coming year. Freddie Mac has held fast to its prediction that 2016 will be the best year for housing since before the crisis.

Freddie Mac doubled down on its housing forecast for 2016 as it released the results of the latest Multi-Indicator Market Index (MiMi) on Wednesday. The national MiMi, which consists of the purchase applications, payment-to-income, current on mortgage, and employment indicators, stood at 83 at the end of February. It was the highest level for the national MiMi since September 2008—right at the beginning of the crisis, and the same month that Fannie Mae and Freddie Mac were taken into conservatorship by the government.

A level of 83 indicates a housing market that is on the outer range of its historic benchmark level of activity. Inside of the national MiMi, the current on mortgage indicator rose by nearly 8 percent over-the-year up to 85.5, which is the low end of the “stable” range but the highest level since August 2008—indicative of the increasingly lower levels of mortgage delinquencies that the mortgage industry is seeing.

The employment indicator rose above its historic benchmark level in February up to 106.5, driven by robust employment growth. The payment-to-income was the only one of the four indicators that declined year-over-year, largely due to low mortgage rates—though that is not necessarily a bad thing.

“Lower rates are helping to support homebuyer affordability across the country, for the moment outweighing the impact of higher house prices,” Freddie Mac Deputy Chief Economist Len Kiefer said.

“Lower rates are helping to support homebuyer affordability across the country, for the moment outweighing the impact of higher house prices.”

Len Kiefer, Deputy Chief Economist, Freddie Mac

In its April 2016 Economic Outlook, Freddie Mac downwardly revised its prediction for GDP growth in the first quarter from 1.8 percent down to 1.1 percent. Despite this, Freddie Mac held fast to its prediction for a stellar year for housing in 2016, stating that they “expect housing to be an engine of growth.”

In Freddie Mac’s March 2016 Monthly Outlook released nearly a month ago, Freddie Mac Chief Economist Sean Becketti laid out the reasons why he believes that 2016 will be the best year for housing in a decade despite widespread reports of low inventory holding back the housing market for many months.

“Low mortgage rates, robust job growth, and a gradual increase in housing supply will help drive housing markets forward,” Becketti said. “Low levels of inventory for-sale and for-rent and declining housing affordability will be major challenges, but on balance the nation's housing markets should sustain their momentum from 2015 into 2016 and 2017.”

The national MiMi’s February level of 83 is 40 percent higher than its all-time low, reached in October 2010 at the peak of the foreclosure crisis. Even with Freddie Mac’s prediction that 2016 will be the best year for housing in a decade, the national MiMi’s February level of 83 is still significantly off from its all-time high of 121.7 reached in 2006 during the bubble.

About Author: Brian Honea

Brian Honea's writing and editing career spans nearly two decades across many forms of media. He served as sports editor for two suburban newspaper chains in the DFW area and has freelanced for such publications as the Yahoo! Contributor Network, Dallas Home Improvement magazine, and the Dallas Morning News. He has written four non-fiction sports books, the latest of which, The Life of Coach Chuck Curtis, was published by the TCU Press in December 2014. A lifelong Texan, Brian received his master's degree from Amberton University in Garland.
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