Freddie Mac has released its full “U.S. Economic and Housing Market Outlook” for December, which is actually the government sponsored entity’s 2012 outlook for the housing market and the economy in general.  Whether you trust the figures and believe the economic projections is going to be entirely up to you.

For 2012, Freddie is calling for overall economic growth (gross domestic product) to “likely strengthen to about 2.5 percent” in the year 2012. The new projection for the fourth quarter is now 2.5% to 3.0% after some recent acceleration.  Our question is whether or not this holds up with Europe having gone into recession.

As far as the U.S. employment situation, the group sees the overall unemployment rate continuing to decline, but it is projecting that the unemployment rate will remain above 8%. It was surprising to see that Freddie was honest about the dismal state of employment with a 15%-plus unofficial unemployment if you include the under-employed. It also even noted the lower participation rates of the workforce.

Interest rates are expected to remain low as well, and it said they will “likely remain very low, at least through mid-2012.” Freddie Mac does see rates inching up in the second half of 2012.

Housing activity is projected to be “better in 2012, but not robust.”  The group now expects that there will be less single-family loan originations but it also believes that there will be more multifamily lending in 2012.  Freddie Mac’s projection for housing starts is expected to be up 10% in 2012, with no significant bounce back in single-family in the coming quarters.

Also noted was as follows: “We expect U.S. house price indexes to move lower before bottoming out in 2012, with modest appreciation forestalled until 2013.

Freddie Mac’s full 2012 housing outlook is available here.

JON C. OGG

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