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Freddie Mac Expects Rates to Rise in Q3 of 2013

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Freddie Mac has released its U.S. Economic and Housing Market Outlook for December showing what some of the market features are expected to look like in 2013. Freddie Mac says to look for long-term mortgage rates to remain near their record lows for the first half of 2013, then rising gradually during the second half of the year, but remaining below four percent. Property values are also expected to continue to strengthen with most U.S. house price indexes likely rising by two to three percent in 2013. While the refinance boom will continue into early 2013, it will be less compared to 2012, so look for single-family mortgage originations to decline by 15 percent, conversely, expect multifamily lending to rise approximately five percent.

"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's  vice president and chief economist. "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."

Household formation should step up further to a net 1.20 to 1.25 million household increase in 2013 with housing starts up around the one million annualized pace by the fourth quarter.

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