Data released by Freddie Mac on Thursday showed that four key housing indicators point to a sustained economic recovery.
In December, unemployment fell to 6.7 percent, though it remains high compared to historical levels. Freddie Mac said in its January 2014 U.S. Economic and Housing Market Outlook that the labor market may require another two years before full employment returns.
Mortgage delinquencies have also fallen by nearly half to reach 5.88 percent, though they remain high above their normal average of approximately two percent.
Between 1999 and 2006, mortgage payments on a hypothetical 30-year fixed-rate mortgage would have risen by 50 percent more than income growth, and currently, payment-to-income ratios are just 60 percent of their 1999 level, suggesting room for upward growth in housing prices.
Home sales have historically averaged approximately six percent of single-family housing stock at an annual rate. During the peak of the housing boom, home sales rose to approximately nine percent before falling to approximately four percent. Home sales are estimated at a pace of 5.8 million in 2014, which could push the rate up to 5.7 percent.
“As we start 2014, the housing recovery continues its steady pace,” Freddie Mac Vice President and Chief Economist Frank Nothaft said. “House-price gains will likely moderate from last year’s pace but rise about five percent in national indexes. Home sales, as well as other key indicators, continue to trend in the right direction, although in some markets we are seeing the sales recovery strengthen while many others remain weak.”