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Posts by Frank E. Nothaft

Chief Economist Frank Nothaft

Chief Economist Frank 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.

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2014: The Emerging Purchase Market

As we look forward to 2014, we see reasons to be optimistic about the economy. Led by a resurgent housing sector, 2014 should shape up to be better than 2013, with consensus forecasts placing economic growth in the 2.5 to 3.0 percent range, more than 0.5 percentage points better than is expected for 2013. A quickening in the recovery pace will also lead to more job creation and should push the unemployment rate below 7 percent, perhaps by mid-2014. We expect single-family home sales and housing starts to be at the highest level since 2007, and expect multifamily transactions and construction to post gains as well. Despite rising mortgage rates and continued property-value appreciation, housing will remain generally affordable in most parts of the country. With household formations expected to pick up and new home completions gaining more slowly, for-sale inventories may remain tight and vacancies low next year.

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Three Reasons America's Homebuyers Rely on the 30-Year Fixed-Rate Mortgage

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.

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Mid-year Update: Taper Talk Trumps

At the midpoint of the year, a central topic has become the timing and speed of the Fed's scaling back of its long-term Treasury bond and MBS purchases: that is, the 'Taper Talk.' This speculation has prompted the recent roller coaster in interest rates and a ride where the exit will be at a higher rate level than the entrance. While higher interest rates on mortgages will slow the housing recovery, they are unlikely to stop it in its tracks. Here's our take on the first half of the year, and our expectation for the second half.

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Peering into 2013

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.

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98.6 Degrees

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.

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