Mortgage giant ""Freddie Mac"":http://www.freddiemac.com/ released an economic outlook Tuesday that portrays the housing economy as one cramped by recent turmoil, with less-than-favorable signs for a recovery despite historically low interest rates and home prices. Comparing the economy to a roller coaster, the outlook forecasts a long ride ahead for a gasping recovery, with interest rates and home prices sure to remain low.[IMAGE]
Written by Frank Nothaft, Freddie's VP and chief economist, the ""U.S. Economic and Housing Market Outlook"":http://www.freddiemac.com/news/finance/docs/Aug_2011_public_outlook.pdf cites employment numbers, economic growth, mortgage rates, and home prices.
""While the capital markets have experienced sizeable movements up and down in recent weeks, these swings are unlikely to lead to whiplash or hospitalization for individual investors,"" Nothaft wrote. ""Heightened uncertainty, unfortunately, can be harmful to the overall economy.""
According to the study, employment for July showed up figures in April, with the economy adding 117,000 jobs and crunching the unemployment rate to 9.1 percent.[COLUMN_BREAK]
It cites a 0.8-percent annual rate for growth over the first half of 2011, with mortgage borrowers signing $130 billion fewer in checks to their lenders and servicers in contrast with numbers from 2008.
Nothaft chalked up these economic forces to continuing lags in recoveries for both housing and the economy at large.
""Though the improvement was encouraging,"" he wrote, ""the labor market needs to sport more job creation to keep up with labor force growth and make a substantive dent in the unemployment rolls.""
He predicted that interest rates will likely remain low, thanks to an earlier decision by the ""Federal Reserve"":http://www.federalreserve.gov/ to push low rates to 2013, calling it ""helpful news for the housing market's recovery.""
Low rates will likely perpetuate a surge in refinancing homebuyers, he added in the outlook, with 3.5-percent troughs for 15-year fixed-rate mortgages ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô numbers not seen since the 1950s ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô elevating home affordability to all-time highs.
Despite these hopeful signs, the overall outlook sketches a housing economy in brittle condition, with the recovery buffeted by uncertain market forces, such as debt default possibilities in euro zone markets, and sluggish overall growth. Nothaft cited home prices, wallowing beneath normal rates at 25 percent on average, as another sign of weakness when sat side-by-side with home sales.
Speaking of the times ahead for housing and economic recoveries at large, Nothaft brings the roller coaster analogy full-circle.
""Roller coaster riders occasionally experience injury as a result,"" he said. ""Perhaps it's best not to look up nor down, but keep one's eyes on the track ahead.""