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.
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.
The U.S. housing market is healing, but how will we know when it's actually "healthy"? Let's use an analogy and say the patient – in this case, the housing market – was running an alarmingly high fever of 103 degrees in 2006, at the height of the boom. The patient collapsed and, after a difficult period of convalescence, now seems to be getting better. Housing starts, sales, and prices are rising, delinquencies and foreclosure inventories are trending down. The question is: What does a national housing market look like at a healthy 98.6 degrees?
To deliver the right prognosis, we need to compare the current housing market to the years before the housing peak, but not the peak itself. Let's start by reviewing the latest data on the market's condition.