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Freddie Mac Sees Double Dip as Unlikely

According to their July 2011 Economic Outlook, Freddie Mac economists are suggesting that the economy has hit a temporary "soft patch" rather than falling into a double dip recession.

The report indicates that the major issues currently weighing down the economy are likely temporary phenomenon that will begin to wain.  The sluggish job market has been impacted by high energy costs, supply disruptions from national disasters and lack of confidence from consumers and business owners.  Additional support is expected to come as the second round of Quantitative Easing by Federal Reserve beings to show in the markets fueling investment.

Although home-buyer affordability has remained at a 40-year high, the boosts in home sales have yet to appear.  However, with consumers remaining concerned about their financial security, decisions on major purchases, such as homes are being delayed.  Plus, with expected home-value appreciation expected to be modest, current renters are more comfortable continuing to rent.

"Single-family home sales will likely improve over the balance of 2011, in keeping with positive GDP forecasts for the United States. Home sales are expected to be up over 2010’s pace, perhaps by 3 to 5 percent," said Frank Nothaft, chief economist for Freddie Mac.  "And after clear weakness in national price metrics through the first quarter, there are glimmers that the second quarter may be markedly better."

Reports by the Case-Schiller Home Price Indices and FHFA Purchase Only Index have shown slight increases in the recent months.  While there may still be a decline in the second half of 2011, due primarily to the level of distressed sales in the market place, Nothaft expects that it will not fall to double dip levels and prices will have gradual improvement over time.

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