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By James Tan | Broker in Elk Grove, CA

Freddie Mac: Housing Still Has 'Substantial' Room to Grow

Housing may not be where it used to be, but on the upside, Freddie Mac suggested this indicates there’s still plenty of room for the industry to grow.

“[T]he level of housing activity is still near historic lows. This means that there is still room for substantial growth in housing and housing-related industries before we return to a more normal environment,” Freddie Mac stated in its latest economic and housing outlook.

This optimistic viewpoint was reflected in the Freddie Mac’s forecast for housing in 2013, especially for housing starts.

Freddie Mac is projecting housing starts in 2013 to increase to 950,000 units or to be about 22 percent higher than 2012 levels. For 2014, the GSE expects another 26 percent increase in annual starts, bringing the total to about 1.2 million.

“Across the nation, most local housing markets have room for sustainable growth, particularly in home construction and sales. As the broader economy heals, expect to see more good news with house prices continuing their recent upward trend, and home sales and housing starts continuing to post strong growth rates,” said Frank Nothaft, Freddie Mac VP and chief economist.

Freddie Mac is also expecting home prices to increase 3 percent in 2013 and 2014. The report gave particular attention to price trends in metros where there were substantial increases through 2006, followed by even more severe declines in home values. According to the report, it’s in many of these metros where there is much room for growth as the markets return to a more normal state.

As home prices recovery, sales should also stand to benefit.

“The effect on sales should be accelerated as house price recovery allows homeowners who have been forced on the sidelines by negative equity to get back into the market,” the report stated.
Home sales are projected to rise to an annual rate of 5.45 million in 2013 and 5.80 million in 2014.

Overall, the housing market is also “showing some love” through its positive contributions to GDP growth, a first since 2005, Freddie Mac said. In 2012, residential fixed investment added 0.3 percent to GDP growth. Furthermore, Freddie Mac says housing may perhaps add close to 0.5 percentage points to GDP growth in 2013.
 
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