Low lending rates and stable mortgage market to benefit US property market in 2013
Lending rates for home purchases are expected to remain low in 2013 and help to boost the price and sales recovery in the US residential real estate market. Long term mortgage rates in the US are likely to remain near their record lows for the first half of 2013, rising gradually during the second half of the year, but remaining below 4%, according to lender Freddie Macs latest outlook report.
The firm, which compiles data on major economic, housing and mortgage market indicators and offers forecasts based on those indicators, also predicts that prices and homes sales will keep growing and construction increase. It says that US house prices will continue to strengthen in 2013 with most residential real estate indices rising by 2 to 3%. ‘The last few months have brought a spate of favourable news on the US housing market with construction up, more home sales, and home value growth turning positive’ said Frank Nothaft, Freddie Mac vice president and chief economist.
‘This has been a big change from a year ago, when some analysts worried that the looming shadow inventory would keep the housing sector mired in an economic depression. Instead, the housing market is healing, is contributing positively to GDP and is returning to its traditional role of supporting the economic recovery,’ he added.
Meanwhile, the National Association of Realtors has welcomed a decision by Congress to reinstating the loan limit formula and maximum cap for Federal Housing Administration insured loans for two years. NAR president Moe Veissi said that it will help reduce consumer cost burdens, stabilise local housing markets and allow qualified, creditworthy borrowers to access affordable mortgage financing.
‘The reinstated loan limits will help provide much needed liquidity and stability to communities nationwide as tight credit restrictions continue to prevent some qualified buyers from becoming home owners and the housing market recovery remains fragile’ he said. The provision reinstates the FHA loan limits through 2013 at 125% of local area median home prices, up to a maximum of $729,750 in the highest cost markets. The floor will remain at $271,050. The loan limits for Fannie Mae and Freddie Mac backed mortgages will remain at 115% of local area median home prices, up to $625,500.
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NAR believes the reinstated loan limit formula and cap change will help make mortgages more affordable and accessible for hard working, middle class families throughout the country, not just wealthy individuals or those in costly markets. Nearly two thirds of buyers who will be helped by the loan limits provision have incomes below $100,000. ‘It’s a misconception that only wealthy borrowers benefit from the maximum cost loan limits. Middle class home buyers living in all areas of the country deserve the same access to affordable mortgage financing and the same opportunity to achieve homeownership that homebuyers enjoy in the most affordable regions of the country,’ explained Veissi.
‘The legislative action will have an impact even in communities with loan limits well below the maximum cap. The reset last month impacted 669 counties in 42 states and territories, with an average loan limit reduction of more than $68,000,’ he added. The bill also provides for a short term extension of the National Flood Insurance Program through December 16, 2011. NAR strongly urges Congress to use the additional time to complete work on a five year reauthorisation of the programme, which ensures access to affordable flood insurance for millions of home and business owners across the country.