The U.S. housing market should continue to get rosier next year, according to the latest forecast from mortgage finance company Freddie Mac, with interest rates remaining near historic lows and home values continuing to rise.
In its U.S. Economic and Housing Market Outlook for December, Freddie Mac predicted that long-term mortgage interest rates will hover around their current 65-year, rock-bottom lows through the first six months of 2013 before moving up slightly by the end of the year. Still Freddie Mac does not think rates will reach above 4 percent anytime next year, allowing home loans and refinances to remain very attractive.
Home prices are likely to keep rising steadily if slower with a national average increase between 2 and 3 percent in 2013. As of October of this year, the National Association of Realtors reported that the national median price for existing homes had risen 11.1 percent from the previous year.
Housing starts are forecasted to increase to an annual pace of 1 million by the end of 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, Freddie Mac vice president and chief economist in the report. “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. Instead, the housing market is healing, is contributing positively to GDP and is returning to its traditional role of supporting the economic recovery.”
And as home prices rise and and interest rates stay low, refinancing is likely to continue for the first few month of 2013, but will probably taper off during the rest of the year as most potential refinance customers will have already taken advantage of rate savings.