Freddie Mac's monthly Economic Outlook for June was released last week. In what has become a mantra, the corporations Office of the Chief Economist, quoting Federal Reserve Chairman Bernanke's recent remarks, is predicting an "orderly and moderate cooling of the housing sector."

In the face of a lot of less optimistic predictions that are being bandied about, a few of which we have talked about here, it is hard to decide ihf Freddie Mac's insistence on a "soft landing" is a reassuring note or whistling in the wind.

Anyway, the current report states that the decline from the records set last year for single-family home starts, home sales, and price appreciation was "inevitable." High levels of prices coupled with rising mortgage rates "have pinched potential buyer's budgets and reduced the overall affordability of homeownership." During the first quarter of this year, the report says, the homeownership rate was down to 68.6 percent which is the lowest in around two years and anecdotal reports point to a switch to buyers markets in many parts of the country from the sellers' markets of past years.

Freddie Mac stated that it expects that gradually rising interest rates will "slacken" demand further and that home sales and construction will decline about 7 percent in 2006. This would, the report said, still result in the third best year ever for those figures, outstripped only by 2005 and 2004. Still, housing starts are expected to decline 16 percent on an annualized basis from 2.13 million units in the first quarter to 1.79 million in the forth quarter, averaging 1.93 million for the year. The May report had projected 1.93 million housing starts for 2007 but that projection quietly became 1.78 million in the June summary tables.

Mortgage originations in general and refinancing in particular will decline, perhaps as much as 25 percent in dollar volume during the upcoming third quarter when compared to the same period in 2005. Refinancing, in fact, may dip as much as 50 percent in year over year figures during that quarter; the projection is for a decline from a 44 percent market share in the first quarter to 28 percent this quarter. The total origination figures are a change from projections in May when they were projected at $2.423 trillion in 2006 and $2.368 trillion in 2007 and have now been revised downward to $2.296 trillion and $2.218 trillion respectively; an adjustment of six percent.

The report holds firm on projected mortgage rates, still estimating a rate of 6.7 percent by year's end with an average for the year of 6.5 percent for 30-year fixed rate loans

Adjustable rate mortgages will decline in popularity through the year, representing 22 percent of mortgages by year's end compared to 28 percent in the first quarter. Consequently lenders are expected to continue to offer discounts on the initial period rate as an incentive to encourage ARM customers.

A couple other figures were changed without comment from the May report. Housing sales for 2006 and 2007 slipped from 6.97 million and 6.50 million to 6.92 million and 6.49 million respectively which is the reason that comparing the summary tables from month to month can be more revealing for this report than reading the text.

The rate at which home values are appreciating is, however, looking better. The economic and housing outlook in May projected an average annual increase in house prices of 7.5 percent whereas the June report projects 7.8 percent appreciation for the year.