Freddie Mac’s Projections for 2015


House on blueprints

On Monday, Freddie Mac released its U.S. Economic and Housing Market Outlook for November. The report states that Freddie Mac economists expect the U.S. economy to continue to gain strength in 2015–including the housing market.

Here is a quote from Frank Nothaft, vice president and chief economist of Freddie Mac:

The good news for 2015 is that the U.S. economy appears well poised to sustain about a 3 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 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 according to Nothaft, a strengthened economy will see a growth in jobs (and better-paying ones), and this will help provide people with the financial means to purchase homes.

Here are some of Freddie’s predictions for 2015:

* Mortgage rates will rise to the high 4’s and possibly hit the 5’s by end of 2015. (Still WAY lower than in years past. Anyone remember interest rates in the high teens?)

* Home appreciation is expected to drop to 3% in 2015. Last year we saw 9.3% appreciation. It is predicted that by the end of 2014, appreciation will be at 4.5%. This continuation of housing appreciation (despite being at a lower percentage than this year and last) in combination with rising interest rates could create some issues with affordability for buyers. Freddie Mac economists state that the level of affordability will go from “very high” to “high.” Again, not so shabby.

* Many new-home builders (and agents for new homes) have had a rough year in 2014. Freddie Mac predicts that for 2015, homebuilding will see an increase of 20% from this year. The increase will help with total homes sold and put us on track to be at the best pace for sales of homes in eight years.

* Origination of mortgage loans for single families is predicted to decrease in 2015. This will be due to fewer people refinancing their homes as interest rates rise. For 2014, refis made up 50% of mortgage loan originations. This number is expected to drop to 23% for 2015. Perhaps loan officers and underwriters will have more time for new mortgages.

It will be interesting to see if Freddie’s predictions are correct.

[Sources: Freddie Mac, Realtor Mag]

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