AP file photo.
Frank Nothaft, chief economist for mortgage giant Freddie Mac, is in San Diego this weekend for the American Economic Association annual meeting. He took some time Friday to talk to U-T San Diego about his national and regional predictions for housing in 2013. Here are some excerpts:
On housing activity: It began to turn around in 2012 and will continue to pick up in 2013. Housing starts nationwide were up 25 percent in 2012 from 2011. Home sales were up about 9 percent during that same time frame. Housing starts this year may rise an additional 20 percent to 25 percent and home sales may rise another 8 percent to 10 percent. Southern California also will see pickup in home prices and sales.
On mortgage rates: Mortgage rates are going to stay at a very low level, mainly due to the Federal Reserve’s decision to continue buying up large quantities of mortgage-backed securities. That pushes up the price of those securities, which reduces the yield and drives the very-low interest rates. The 30-year fixed conforming loan rate is expected to remain below 4 percent.
On distressed levels: Foreclosures remain at relatively high levels but the nation’s so-called “shadow inventory” has come down appreciably during the past two, three years. Still, there are about 3 million homes in the nation that are seriously delinquent on their mortgages. But again, that’s fallen appreciably, dropping by 1.5 million. We should also expect the bank-owned home supply to be limited over the course of 2013.
On the progress of the recovery: “The Fed recognized that the housing market has been the laggard (among the economic sectors.) And that’s why they introduced Operation Twist and the third round of quantitative easing in order to push mortgage rates to these record-low levels. And in order to really stimulate housing activity. Indeed, I think they have been successful in what we’ve seen in the past year,” he said.
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