Posts by Frank E. Nothaft
Frank E. Nothaft is Freddie Mac’s chief economist. Nothaft is responsible for forecasts, research and analysis of the macroeconomy, housing and mortgage markets. He is also involved in affordable lending analysis and policy issues affecting the housing finance industry.
It has been more than seven years since the beginning of the deepest housing recession since the Great Depression. As housing activity fell, nervous speculation took off in the media and industry about when (if ever) housing would get back to normal. Given the pickup in sales, new construction, and home values over the past couple of years, it’s fair to ask if we’re there yet: is the U.S. housing market back to a normal range of activity with a good balance between demand and supply forces?
Remember last year when the 15-year fixed-rate mortgage rate was an unbelievable bargain at just over 2.5 percent, the lowest in recorded history and about three-quarters of a percentage point below a 30-year fixed-rate loan? So everyone buying a house was getting a 15-year loan, right? Nope. Thirty-year fixed-rate mortgages dominated – accounting for more than 85 percent of the home-purchase loan market in 2012.
The last few months brought good news for the U.S. housing market: construction up, more home sales, and home value growth turning positive. This has been a big change from a year ago. Given that, what are our crystal ball predictions for housing in 2013?
Mortgage Rates Stay Low. Look for fixed-rate mortgage rates to remain near their 65-year record lows for the first half of 2013 then begin rising a bit in the tail end of next year, but staying below 4 percent. In the single-family market, this means homebuyer affordability should remain very high in 2013 for those with good credit history, stable income, and sufficient savings.