Recent drops in oil prices and mortgage rates, along with positive tailwinds in the economy, are helping to jump-start the housing market in the new year, according to Freddie Mac’s newly released2015 U.S. Economic and Housing Market Outlook for January. Consumers are gaining confidence, which is expected to translate to higher home sales in the coming months. Some economists are skeptical on whether this latest jolt will stick around for the entire year, however.
Freddie Mac economists note that mortgage rates continue to remain well below expectations, and they predict that mortgage rates will remain low at the beginning of 2015, staying around 4 percent for the first two quarters of the year at least. Last week, mortgage rates dipped to a 20-month low with the 30-year fixed-rate mortgage rate plunging to a 3.66 percent national average and the 15-year fixed-rate mortgage dropping to 2.98 percent.
“We … expect these low mortgage rates to help the growing purchase market continue to expand and reach the highest levels we’ve seen since 2007,” the economists note.
But rates likely will move up by the end of the year. Lawrence Yun, chief economist for the National Association of REALTORS®, says that the 30-year fixed-rate mortgage could average around 5 percent – or higher – by the end of this year.
“I would not be surprised if it is above 5 percent because when mortgage rates move or interest rates move, it is generally not in a slow creep,” Yun told Bankrate.com.
Source: “January U.S. Economic & Housing Market Outlook,” Freddie Mac (January 2015) and “Housing Market’s ‘Interesting Times,’” Bankrate.com (Jan. 19, 2015)