As the peak season to buy a home approaches, Freddie Mac has upped their original forecast of 2015 mortgage originations to $1.3 trillion due to low mortgage rates and an improving job market. The market will see 40 percent of home sales over the next four months, according to Freddie Mac.
Upon the release of Freddie Mac’s March 2015 U.S. Economic Housing Market Outlook, Deputy Chief Economist Len Kiefer said the next few months will determine the success of 2015’s housing market. Here’s why Freddie Mac is optimistic for spring 2015.
A Great Year for Home Sales
The outlook forecasts 2015 to be the best year for home sales and new home construction since 2007, when home sales totaled 5.8 million.
Rental rates are expected to increase at or above inflation, possibly pushing prospective homebuyers into the market. Rents increased an average of 3.6 percent in 2014 and approximately 11 percent over the last three years, according to Freddie Mac.
Mortgage Rates and Affordability to Remain Favorable
Though the Federal Reserve is still expected to begin increasing the fed funds target, long-term interest rates are expected to rise slowly throughout the year – though not by much. The average 30-year fixed-rate mortgage rate forecast for 2015 was revised in March to 4% for the year, down from the forecasted 4.2% in January.
According to data from the 4th quarter of 2014, 80 percent of metro U.S. markets are affordable based on three factors: home prices, interest rates and income.
Employment Rates Up
Over a twelve month span ending in February 2015, the U.S. economy added approximately 3.3 million jobs, the fastest pace in 15 years. Freddie Mac predicts a rise in income to follow tightening labor markets.
A key demographic to the housing market, Millennials, also saw improved job prospects, up nearly one percent from February 2014. An increase in employment rates paired with rising rents could push some Millennials toward homeownership this year.
Based on the market outlook, Kiefer said, “This is great news for housing markets, especially headed into the spring homebuying season. Lower rates help offset some of the recent increase in house prices and keep homebuyer affordability high.”
If you are interested in buying a home this spring, contact one of our mortgage bankers. For more information on home buying and financing, download our free Mortgage 101 Handbook for a great first-time homebuyer resource.