Freddie Mac 2015 Projections

A pickup in household formations and overall housing activity depends greatly on the pace of economic growth. The good news for 2015 is that the U.S. economy appears well poised to sustain about a 3.0 percent growth rate in 2015—only the second year in the past decade with growth at that pace or better. There are several reasons for the expected better macroeconomic performance. Governmental fiscal drag has turned into fiscal stimulus, lower energy costs support consumer spending and business investment, further easing of credit conditions for business and real estate lending support commerce and development, and more upbeat consumer and business confidence, all of which portend faster economic growth in 2015. And with that, the economy will produce more and better paying jobs, providing the financial wherewithal to support household formations and housing activity ….

So, what will be some of the market features for 2015?

Interest rates

… We expect to see interest rates climb throughout 2015, averaging about 2.9 percent for 10 year Treasuries and 4.6 percent for 30-year mortgages …

Prices & Affordability

In addition to rising interest rates, we also expect house price gains to continue, albeit at a more moderate pace. Our current projection is for annual house price gains to slow from 9.3 percent in 2013, to 4.5 percent in 2014 and 3.0 percent in 2015 …

Home Sales/Starts

Look for housing activity to accelerate in 2015. We’re forecasting total housing starts to increase by 20 percent from 2014 to 2015. We’re also expecting to see total home sales increase by about 5 percent over that time period …

Single-family Originations

Increasing home sales are good news for mortgage Markets … We expect originations will fall an additional 8 percent from 2014 to 2015, before rising home values and increasing purchase originations finally offset the decline in refinance volume and drive originations higher.

Rentals in Demand

Rental markets are expected to remain tight in most urban markets across the U.S. … As household formations pickup in 2015, rental apartments will generally be their first home. Rental vacancy rates remain at or near their lowest level since 2000, and rent growth exceeds inflation in most markets. That has prompted new development and property value gains, which has led to property sales and new mezzanine debt …

read more –>  http://www.freddiemac.com/finance/pdf/November_2014_public_outlook.pdf

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