Freddie Mac Economist: Housing, Mortgage Markets Remain Bleak

The U.S. housing market continues to contract as the amount of delinquent loan payments and defaults on mortgages rise, prompted by high unemployment, a Freddie Mac (FRE) economist said on Thursday.

Frank Nothaft, Freddie Mac's top economist, speaking before the National Economist Club in Washington, said that while overall near-term housing market projections remain bleak, sales of existing homes are occurring.

However, Nothaft said there is a very high excess inventory of homes and most of the homes being sold are foreclosure properties - about 40%. "But I do think they are near the bottom and we will see some turn up in the second half of the year," Nothaft said.

Still, various measures of U.S house prices will likely decline throughout this year and through 2010, Nothaft said. "It'll be 2011 before we see any improvement or increase in these national U.S. house price measures."

According to Nothaft, other trends in the housing and mortgage markets include a direct correlation between unemployment and states with the highest rates of delinquent mortgages, an increase in Federal Housing Administration lending and a two percentage point decline fixed-rate mortgage rates since October.

Nothaft, attempting to ease the sour housing data, said to members of the economist club: "The good news is low mortgage rates."

"That will help to promote affordability for home buyers and provide refinancing opportunities for many owners who have loans," Nothaft said.

-By Darrell A. Hughes, Dow Jones Newswires; 202-862-6684; [e-mail]