Freddie Warns of Unsold Home Inventory

A large inventory of unsold homes on the market could continue to put downward pressure on homes prices even with strong home sales this spring, according Freddie Mac chief economist Frank Nothaft.With solid job growth and favorable rates on fixed-rate mortgages, "conditions are ripe for a firming in housing demand," Mr. Nothaft says in his April economic outlook report. However, Freddie's chief economist points out that the inventory of unsold new homes hit a 16-year high in February, and there is an unusually large number of existing homes listed for sale this spring. Meanwhile, a significant number of potential homebuyers may not qualify for financing this year because of problems in the subprime market, foreclosures are rising, and there is a large number of vacant homes, which suggests a "hidden supply" of homes that may go up for sale this spring. "Even if the expected upturn in housing demand does materialize, these sources of excess supply will continue to weigh on price appreciation nationally and may lead to continued price declines in the hardest-hit local markets," Mr. Nothaft said. Freddie Mac can be found online at http://www.freddiemac.com.