Freddie Mac Forecasts ‘Solid Ground’ for Future of Housing Market

Freddie Mac’s Economic and Housing Market Outlook for October is headlined Finding Solid Ground.

As you might expect, therefore, the report is good news for anyone considering a Florida home mortgage. Even though sales of new and existing homes in August were 12 and 18 percent lower, respectively, than a year earlier, the lending giants predicts a cooling - NOT crashing - of the industry.

Inside this national and Florida mortgage market report

The study, published by the Office of the Chief Economist, talks about how indirect effects of the housing slump - lower consumer spending on major household goods such as furniture and appliances and job and income setbacks in the construction, real estate, and mortgage industries - will have a larger impact on the economy as a whole.

Freddie Mac projects the “overall drag from the housing sector” will cause as much as a full percentage point loss from Gross Domestic Product growth in the third and four quarters.

The report also speculates that, even though homeowners are not pulling equity out of their homes in the form of cash as they had been, individuals are still spending. Much of the decline in “equity extraction” can be attributed to slower home sales, which have locked up equity that might otherwise have further increased consumer spending.

Positive housing market signs

The housing markets are already benefiting from recent declines in interest rates; the 30-year fixed-rate mortgage has dropped 50 basis points since summer, triggering a boom in Florida mortgage refinancing. The report speculates that much of this activity is on the part of borrowers with ARMs who are seeking to lock in fixed rates before their current mortgages adjust.

The forecast notes that there are some signs that the housing markets might be “nearing a floor.” For example, applications for purchase money mortgages have stabilized recently at 2003 levels; that year was considered a moderately strong one for Florida home loan demand.

Homes are projected to appreciate at an average of 5.7 percent for the second half of 2006 and 6.2 percent during the first two quarters of next year. That should give optimistic owners even more of a reason to believe that values are not in trouble.

Complete our cost-free form atop this page and talk about your Florida mortgage options with an expert!