Homes Sales Estimated to Fall by 20 Percent in Third Quarter
The Federal Home Loan Mortgage Corporation – commonly known as Freddie Mac – said in its September economic outlook that existing home sales will decline more than 20 percent in the third quarter compared with the same period one year ago.
Freddie Mac said that continued high delinquencies, foreclosures and falling home sales have all contributed to a lack of confidence in a housing recovery, and that the main issue for the housing market outlook is how much of declining sales can be blamed on home sales that were pulled forward by the federal homebuyer tax credit that expired in June.
In its September outlook, Freddie considered two scenarios for how the market might respond following the end of the government stimulus. The first scenario assumes that about 600,000 homes were pulled forward because of the tax credits, and that these will be paid back over a gradual recovery.
The second scenario supposes that only 300,000 homes were pulled forward and the rest were sales that would not have happened without the tax credit. Under this scenario, sales would recover must faster, maybe even by the end of October.
Freddie also predicted that the 30-year fixed-rate mortgage rate would increase gradually over the next six months, passing 5 percent in the last quarter of next year, and that unemployment would decrease to 8.6 percent by the end of 2011.
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Greg Gilbert
Keith Maynard
