Freddie Mac: Housing market improvements may differ from previous peak

A recent projection from Freddie Mac showed that the residential housing market's health may not resemble levels seen in 2005.

A recent projection from Freddie Mac showed that the residential housing market's health may not resemble levels seen in 2005.

Property data should reveal that the total home sales level will rise 5 percent of the inventory, which could be as much as 7 million homes sold each year. However, in 2005, the figure was 7 percent, the government-sponsored enterprise explained. Housing starts will also rise to as much as 1.8 million, lower than the 2.1 million recorded in 2005. Figures lower than the previous peak levels would make for a healthy housing market.

"What a healthy housing market should look like will dismay those who keep comparing housing to what it was during its peak years," said Frank Nothaft, vice president and chief economist for Freddie Mac. "However, taking into account recent trends, key housing indicators and the shifting demographic patterns that will define a new and realistic trajectory toward a healthy housing market, the long-term prognosis is promising ' just don't expect the housing market to wake up at 98.6 degrees tomorrow morning."

Delinquency rates should be much lower than the previous peak, recorded in 2010, the report explained. The next five years should see home loans considered to be significantly delinquent drop near 2 percent. The previous peak nearly reached 10 percent.

Vacancy rates should also be far less than the peak levels, recorded during the recession, according to Freddie Mac. The rate should drop to close to 1.7 percent of the total inventory, while rental homes should remain around 8 percent vacant. Rental properties had a peak vacancy rate of 11 percent three years ago, while in 2008, the peak level of homes for sale was 3 percent.

The report added that price appreciation will increase by 3 percent each year, which is much lower than the 11 percent recorded in 2005.

Foreclosures continue declines
The housing market may benefit from the continued drops in foreclosures. According to real estate records from RealtyTrac, September experienced a 7 percent drop from August's level, as well as 16 percent lower than the same month last year.

The report added that the 180,427 foreclosure actions during the month was the lowest level recorded in five years.



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