Just in time for tomorrow’s commercial real estate special emphasis, Freddie Mac chief economist Frank Nothaft has forecasted five key traits for the 2011 housing and mortgage markets.
1) Low Mortgage Rates. Fed observers are expecting the central bank to keep the federal funds rate at its current target range of 0 percent to 0.25 percent for most – or all – of 2011. Thirty-year fixed-rate loans are likely to remain below 5 percent throughout the year, and initial rates of 5/1 hybrid adjustable-rate mortgages will likely remain below 4 percent in 2011.
2) House-Price Recovery. Most experts look for single-family U.S. indexes to bottom out in the first half of 2011, with a gradual (but sustained) recovery after that.
3) Homebuyer Affordability. The three main ingredients that affect buyer affordability are mortgage rates, house prices, and income. With the first two at or near cyclic lows, buyer affordability is at the highest level in decades.
4) Fewer Mortgage Originations. Many eligible borrowers have already refinanced and the federal Making Home Affordable refinance program is expiring on June 30. While fixed-rate loans are likely to remain low, they will move up gradually, making it even less likely that refinances will be attractive to most home owners.
5) Lower Delinquency Rates. Reflecting employment gains and family income growth, additional loan modifications and the transition of foreclosed homes to REO, look for the seriously delinquent rate in the overall market to gradually decline further during 2011.