""Freddie Mac"":http://www.freddiemac.com/ released its U.S. Economic and Housing Market Outlook for May on Wednesday, pointing to the available data as an encouraging sign for housing and the economy in 2012-3.
[IMAGE]The release details information gathered about economic growth and housing markets over the first quarter of 2012. Although not all of the data is positive, the outlook stated that the data for the most part ""trend in the right direction.""
The Bureau of Economic Analysis reported 2.2 percent economic growth in first-quarter 2012, a drop from the last quarter of 2011. However, the release pointed out that this was still higher than it has been for three of the past four quarters. The slower growth reflects less inventory accumulation and a fall in nonresidential construction. Personal consumption expenditures grew at a 15.3 percent annual rate, which reflects continuing strength in consumer durables.
According to the report, residential fixed investment (RFI) also contributed to economic growth, adding 0.4 percentage points. RFI mostly reflects new housing construction and remodeling expenses and has been a contributor to growth for four straight quarters, with first-quarter 2012 receiving the biggest boost in nearly two years. However, the release states that RFI remains weak for this stage of the economic recovery when compared with previous business cycles.
The Freddie Mac House Price Index (FMHPI) for the first quarter of 2012 suggested that home values may be at or approaching their bottom in many markets. At the state level, the index rose at least 0.5 percent in 13 states between first-quarter 2012 and fourth-quarter 2011, stayed about flat in nine states, and fell at least 0.5 percent in the remaining 28 states. This, combined with low fixed-rate mortgages, may result in a sales increase in 2012 relative to last year. The low FMHPI also bodes well for 60 and 90-day delinquency rates, which have both declined across all markets in recent quarters. However, they remain historically high.
Home ownership rates continued to fall throughout the first quarter despite the increased affordability of homes. The Census Bureau reported that the national ownership rate dropped 0.5 percentage points to 65.5 percent (seasonally adjusted) during the quarter, a level not seen since 1997. With foreclosure proceedings continuing, this number should continue to fall.
Freddie Mac's first-quarter refinance activity reports showed that about 80 percent of borrowers who refinanced their mortgages either paid down their balance or kept it about the same. Loan deliveries under the enhanced Home Affordable Refinance Program (HARP) also picked up. The number of loans refinanced through HARP represented 20 percent of all refinance fundings at Freddie Mac, the highest share since HARP was created.
Despite the few shortfalls, the overall outlook is very good, according to Freddie Mac VP and chief economist Frank Nothaft.
""Taken together, the first-quarter data releases provide an encouraging sign for both the macroeconomy and the housing recovery,"" he said. ""While not uniformly positive, for the most part the data trend in the right direction.""
The full document can be found ""at this link"":http://www.freddiemac.com/news/finance/docs/May_2012_public_outlook.pdf.