Freddie Mac said that first quarter 2011 economic data that has begun to emerge from various sources are, even though some is preliminary, beginning to create an impression of what the year may hold. Data on economic growth indicates that the quarter had slower growth than the one that preceded it but was still up from three of the previous four quarters. The slower growth primarily reflected less inventory accumulation and a dip in residential construction.
According to the corporation’s Economic and Housing Market Outlook for May, personal consumption grew at a 15.3 percent annual basis and residential fixed investment added 0.4 to the quarter’s 2.2 percent economic growth. This factor, which primarily reflects new housing construction and home remodeling, has been up for four straight quarters
The Freddie Mac House Price Index (FMHPI) for the first quarter suggested that home values might finally be at or near the bottom in many markets, rising at least 0.5 percent in 13 states over fourth quarter results and remaining essentially unchanged in nine more. Still 28 states saw further declines of at least 0.5 percent. Freddie Mac’s economists point to record low mortgage rates as a reason to hope for a sales pickup in 2012.
The high degree of affordability shown by the FMHPI also bodes well for further declines in delinquencies beyond those shown for both 60 and 90 day delinquency rates released by the Mortgage Bankers Association (MBA) earlier in the month.
The forecast said that, despite some signs that the housing market may have bottomed, homeownership rates continued to decline during the first quarter, dropping 0.5 percentage points to 65.5 according to the U.S. Census Bureau. This was a level last seen in 1997. Freddie Mac says that some additional slippage in this rate is likely as long as so many homes remain in foreclosure.
The economists pointed to another important first quarter metric – Freddie Mac’s refinancing activity report which showed most homeowners who refinanced took out the same or lower sized loans and about one-third shortened the terms of their mortgages. Refinances through the enhanced Home Affordable Refinance Program (HARP 2.0) picked up during the quarter and represented 20 percent of all Freddie Mac refinances, the highest share since HARP’s inception.
Taken together, the forecast says, “The first-quarter data releases provide an encouraging sign for both the macro-economy and the housing recovery. While not uniformly positive, for the most part the data trend in the right direction.”