Freddie Mac: US Housing Market Is Still Stuck in the Mud

Friday, 30 May 2014 08:40 AM

By John Morgan

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For those hoping that housing will lead a robust recovery, Freddie Mac is not exactly offering a beacon of hope — the mortgage giant estimates many of the nation's housing markets are stalling.

Freddie Mac said its research shows only 10 of the 50 states plus the District of Columbia could be considered to have "stable" housing markets. The top five are North Dakota, Wyoming, the District of Columbia, Alaska and Louisiana — four energy-producing states plus the cradle of government spending.

Only four of the top 50 metro areas were ranked stable by Freddie Mac — San Antonio; New Orleans; Austin, Texas; and Houston.

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The data were collected for Freddie Mac's Multi-Indicator Market Index (MiMi), which monitors the health of U.S. housing activity.

"Less than half of the housing markets MiMi covers are showing an improving trend, whereas at this same time last year more than 90 percent of these same markets were headed in the right direction," said Frank Nothaft, Freddie Mac's chief economist.

"We're hopeful that many of these markets that have stalled will start moving again now that mortgage rates have eased over the past month and the spring home buying season is upon us."

Round out the top 10 most stable U.S. housing markets by state are Montana, Hawaii, West Virginia, Texas and Vermont.

The bottom 10 housing markets by state were (from worst to least bad) Nevada, New Jersey, Georgia, Illinois, Florida, Connecticut, Rhode Island, Arizona, Ohio and Colorado.

"House price gains are a double-edged sword at this stage of the recovery," Nothaft said. "They help those hard-hit markets where prices are still low and many homeowners are underwater, but in areas where supply is constrained, they're creating an imbalance and pricing out many first-time homebuyers."

Even before the latest MiMi index was published, Freddie Mac revised its forecast for the housing market lower. Nothaft said there are "various imbalances" holding it back, including the jobs market.

"Housing needs stronger, and just as important, sustained levels of job creation to get the housing engine firing on all cylinders," he noted.

To compile its assessment of whether a given housing market is stable or not, Freddie Mac looks at home purchase applications, payment-to-income ratios, proportion of on-time mortgage payments in each market and the local employment picture.

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