US housing recovery likely to slow in Q4: Freddie Mac

22 October 2013 17:46 Source:ICIS News

WASHINGTON (ICIS)--The bumpy housing market recovery likely will see a slowdown in the fourth quarter, a top federal mortgage market agency said on Tuesday, citing increasing home loan interest rates and declining consumer confidence.

In its monthly appraisal of the housing sector and the US overall, Freddie Mac said that the federal government shutdown, debt ceiling issues and slow growth in the underlying economy “are slowing the housing recovery heading into the fourth quarter of the year”.

Freddie Mac, the congressionally chartered secondary mortgage market, said that the housing market in particular will be affected by rising mortgage loan rates.

“By the end of the year, expect mortgage rates to be around the 4.3% level and then head higher into 2014,” the analysis and outlook said.

Average US interest rates for a 30-year fixed-rate mortgage (FRM) bottomed out at 3.35% at the end of last year and have been inching up ever since.

Frank Nothaft, chief economist at Freddie Mac, said that “We’re likely going to see the housing recovery slow down, but not shut down, as we close out the rest of this year”.

He cited tight housing inventories and “slumping consumer confidence” in addition to rising loan rates as driving the anticipated slowdown.

The Freddie Mac outlook also cited “a declining supply of distressed sales and a severely depressed level of new construction”.

“Expect the US economy to add less than 1m housing units in 2013 and around 1.15m in 2014, significantly below normal levels,” the outlook said.

A return to normal or near-normal levels may take time, the forecast said.

“Expect the ramping-up of residential construction to take a while, and while economic growth will improve over the next year, the economy won’t be operating at full potential until sometime after 2015,” Freddie Mac said.

The US housing sector, especially new home construction, is a key downstream consuming industry for a wide variety of chemicals and resins, either as building materials or in the production of end-use components.

Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy

By Joe Kamalick