As the economy continues to post gains throughout the end of the year, the outlook for the overall economy and national housing market from Freddie Mac reveals most factors will continue to trend upward.
According to the U.S. Economic and Housing Market Outlook for December, longer term mortgage rates will likely remain low throughout the start of next year, providing prospective buyers with high affordability. This does not match expectations from earlier this year, that predicted both home prices and mortgage rates would increase significantly before the end of 2012.
Sales have been high, even throughout the slower season this year, as consumers continue to take advantage of low mortgage rates. Refinancing has also been popular for those who have already made the investment but are looking to pay less in interest or lower their monthly mortgage payments.
Though refinancing was popular this year, Freddie Mac says it will be notably less active this year, though the first half of next year may be stronger than the second. The report suggests that mortgage originations for single-family properties will fall by 15 percent, while multifamily lending could increase around 5 percent in 2013.
Mortgage rates still low, could provide a historically active fourth quarter
Despite being wrong about mortgage rates, as they've remained near record lows set throughout October and November, home prices have been on the rise throughout the latter part of the year. Additionally, the government-sponsored enterprise believes property values will continue to grow stronger, with national home prices indices posting 2 to 3 percent gains next year.
"The last few months have brought a spate of favorable news on the U.S. housing market with construction up, more home sales, and home-value growth turning positive," said Frank Nothaft, vice president and chief economist of Freddie Mac. "This has been a big change from a year ago, when some analysts worried that the looming 'shadow inventory' would keep the housing sector mired in an economic depression."
With a lower inventory of properties after a surge of sales in 2012, builders have become more confident in new-home sales. The GSE says household formation should increase somewhere between 1.20 to 1.25 million households, and starts ups will near an annual pace of 1 million before the last quarter of next year.