The housing market turned the corner in 2012 Freddie Mac's economists said today, and the recovery was fully underway in 2013. But despite the positive trends in home price indexes, housing starts, and home sales, when can we say that housing has fully recovered? Chief Economist Frank E. Nothaft and Deputy Chief Economist Leonard Kiefer attempt to answer that question in the January edition of Freddie Mac's U.S. Economic and Housing Outlook.
The two say that for the economy and housing market to be functioning normally we need to see four positive indicators; a healthy jobs market with low and stable unemployment, mortgage delinquencies back near historical averages, home prices that are consistent with an affordable mortgage payment-to-income ratio, and home sales in line with historical norms.
Since the recession the labor market recovery has been modest with a December unemployment rate of 6.7 percent, high by historical standards but moving down. Most economists agree that the rate should be between 5 and 6 percent for an economy at its long-run potential. Nothaft and Kiefer say it may be another two years before that is achieved.
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