Forecast from Freddie Mac Analysts – 2011 Housing Market

There are five features of Freddie Mac’s analysis which are thought to be crucial for the 2011 housing and mortgage markets, based on the following points:

• Low mortgage rates: There is an expectation from the central bank to keep the federal funds as low as 0 to 0.25% for 2011, and with that comes low mortgage rates. It is expected that the loans for 30 years on a fixed rate of interest will be below 5% p.a. and initial rates of 5/1 hybrid adjustable-rate mortgages will likely remain below 4 percent in 2011.

• Prices have hit bottom: The housing rates have already started to become gradually higher than the previous year. This will sustain in the second half of 2011.

• Housing will remain affordable: As the loan interest rates come down, it will be easy for an average income earner to afford a house with a cheaper interest rate.

• Refinances will dwindle: Refinances will be another option for most of the homeowners, as the fixed rate of interest will remain low this year, so it will gradually decrease the demand in the refinance market as rates increase.

• Delinquency rates will decline: As the payroll rises this month coupled with the subsequent fall in interest rates, the delinquency in payments will be less.