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Freddie Mac Sees Bittersweet Economic Outlook

Some things are meant to be a little sweet and a little bitter. They’re just better that way. Semi-sweet chocolate and sweet and sour sauce, just to name a few are some of the finest flavors known to man. Unfortunately, the mixture of bitter and sweet doesn’t always work. Take the economy for instance.

According to the July 2014 U.S. Economic Housing Outlook released Monday by Freddie Mac; the economic results were mixed in the first half of the year as the housing industry slowed.

According to the report, residential fixed investment fell 4 percent in the first quarter. Housing starts for June fell by 9.3 percent from the May pace. After adding to economic growth in 2012 through mid-2013, housing activity has slowed and is no longer driving the economic recovery.

But not all is lost.

"Although the economic news for the first half of 2014 has been bittersweet, there is good news to share as we head into the latter half of summer,” said Frank Nothaft, Freddie Mac vice president and chief economist. “In particular, employment was up by nearly 1.4 million during the first six months and this will bolster household formations, resulting in positive gains most immediately for the rental housing market and then, longer term, for single-family home sales.”

“The multifamily rental market has led the rest of the housing sector into recovery, and about one-third of housing starts in the first quarter were for multifamily rental apartments. There's no question the single-family recovery is moving slowly, but it continues to doggedly press forward and we are cautiously optimistic."

The American public is less sure that the economy is headed in the right direction.

A survey recently conducted by Rasmussen Reports found that only 19 percent of consumers rate the U.S. economy positively, including four percent (4%) who rate it as excellent. Forty percent (40%) rate it as poor. Additionally, consumer sentiment is also down to its lowest point in months.

Cautious optimism is probably the correct position to take when evaluating the current state of the economic climate. But for the American people, the mixture is much more caution than optimism. A strong third quarter could do much to improve the psyche of the consumer.

About Author: Derek Templeton

Derek Templeton is an attorney based in Dallas, Texas. He practices in the areas of real estate, financial services, and general corporate transactional law. His experience includes time as an Attorney Adviser for the U.S. Small Business Administration and as General Counsel for a nonprofit organization in Dallas. A self-avowed "policy junkie," he has a keen interest in the effect that evolving federal policy has on the mortgage, default servicing, and greater housing industries.

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