Freddie Mac’s September U.S. Economic and Housing Market Outlook Report showed that consumers and businesses have become more energy-efficient, thereby dampening the negative impact of recent fuel-price spikes on the economy. In addition, monetary policy is unlikely to be affected by short-term fuel-price inflation, allowing for an extended and favorable interest-rate environment.
The Housing Market Outlook Report reported the following:
• Between 1973 and 2011, energy consumption fell by 0.3 percent (annualized) to 314 million Btus per capita.
• Fuel economy of passenger cars has also improved, rising from an average of 13.4 miles per gallon (mpg) in 1973 to 22.6 mpg in 2008.
• A favorable interest-rate environment will remain at least through the end of this year to help energize the housing market.
• Measured relative to square footage, homes built since 2000 have fuel costs that are about 30 percent lower than that of homes built before 1960.
Comparing the first seven months in 2012 with the same period in 2011, home sales are up 8 percent, and housing starts have rebounded by 19 percent. Furthermore, second-quarter national house-price indexes have recorded a gain on a year-over-year basis.
“A fuel-price spike doesn’t pack the same punch it once used to in part because of more efficient use of energy. And with core inflation largely in-check and below 2 percent, the Federal Reserve has been able to extend its Maturity Extension Program through year-end, thus keeping long-term interest rates, such as 30-year fixed-rate mortgages, at extremely low levels,” said Frank Nothaft, Freddie Mac vice president and chief economist.
Freddie Mac, chartered by Congress in 1970, has a public mission to stabilize the nation’s residential mortgage markets and expand opportunities for homeownership and affordable rental housing.