June 2011 U.S. Economic and Housing Market Outlook: The Doughnut or the Hole?

June 16, 2011

Home sales growth remains dampened by declining consumer confidence and economic uncertainty, according to Freddie Mac’s June 2011 U.S. Economic and Housing Market Outlook.

Despite the market difficulties, average monthly sales of existing homes are up approximately 5 percent during the first four months of 2011 from the average pace of 2010.

"Even though near-term concerns over income and sales growth are restraining consumer spending, business hiring, and new building, there have been a number of positive signs in the economy that growth will continue and is likely to accelerate in the second half of this year, said Frank Nothaft, vice president and chief economist for Freddie Mac. Highlights of the report reveal:

  • Net job creation was 54,000 for May – less than one-third the average pace for the first four months of 2011; unemployment rate ticked up for the second straight month to 9.1 percent, the highest this year.
  • First quarter data on U.S. house-price softness has removed a catalyst to immediate action: some potential homebuyers are waiting for clearer signs home values have firmed.
  • Supply chain interruptions related to the earthquake and tsunami in Japan and severe weather-related disruptions reducing employment gains are likely to be reversed in the coming months.
  • More robust economic growth is expected to return during the second half of the year supported by the accommodative monetary policy pursued by the Federal Reserve Board.
  • During the first four months, average monthly sales of existing homes were up about 5 percent, inline with the projected 5 percent increase in 2011 home sales over 2010, on a calendar year basis.
  • The National Multi Housing Council reported that property managers in most local markets have found a tightening in rental markets and greater availability of equity and debt financing, and released a relatively upbeat Market Tightness Index of 90.
"While parts of the housing industry remain weak, the rental market has clearly strengthened and homes sales are above last year's pace,” Nothaft said. “Look for a gradual but substantive improvement in housing activity in the coming year."

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