Fred­die Mac sees U.S. home prices ris­ing in 2016-2017, driven by GDP, low mort­gage rates

Financial Mirror (Cyprus) - - FRONT PAGE -

Mort­gage Mar­ket Sur­vey showed that the av­er­age 30-year fixed-rate mort­gage fell to a rate of 3.41%. This is within strik­ing dis­tance of an all-time low. Fred­die Mac also said that this should boost hous­ing ac­tiv­ity, par­tic­u­larly re­fi­nanc­ing ac­tiv­ity.

Fred­die Mac’s lat­est eco­nomic and hous­ing price out­look is still call­ing for growth on both fronts (hous­ing and econ­omy). The fore­cast calls for growth to re­bound in the sec­ond half of 2016, with gross do­mes­tic prod­uct (GDP) ris­ing 1.9% in 2016 and then ris­ing 2.2% in 2017.

Where this gets in­ter­est­ing for new home buy­ers is that Fred­die Mac now fore­casts lower-than-ex­pected mort­gage rates. The monthly fore­cast said:

“In light of re­cent global pres­sures, the 30-year fixed-rate mort­gage fore­cast has been re­vised down for both 2016 (by 30 ba­sis points) and 2017 (by 50 ba­sis points) to 3.6% and 4.0%, re­spec­tively. … Based on these low mort­gage rates, ex­pect the re­fi­nance share of orig­i­na­tions to rise to 49% for 2016, 8 per­cent­age points above last month’s fore­cast. This trans­lates to about $100 bil­lion more in orig­i­na­tions, bring­ing the to­tal for 2016 to $1,825 bil­lion. The house price ap­pre­ci­a­tion fore­cast for 2016 re­mains at 5.0%, and in 2017, 4.0%.”

Sean Beck­etti, chief econ­o­mist at Fred­die Mac, said: “With the U.K.’s de­ci­sion to exit from the Euro­pean Union, global risks in­creased sub­stan­tially lead­ing us to re­vise our views for the re­main­der of 2016 and all of 2017. None­the­less, the tur­bu­lence abroad should con­tinue to cre­ate de­mand for U.S. Trea­suries and keep mort­gage rates near his­toric lows; thereby, al­low­ing home sales to have their best year in a decade, along with a boost in re­fi­nance ac­tiv­ity.”

Fred­die Mac’s fore­cast for un­em­ploy­ment, fac­tor­ing in June ver­sus May data, is now called to av­er­age 4.9% in 2016 and 4.8% in 2017.

All in all this is one of those re­ports that could have been ti­tled “Let The Good Times Roll.”

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