5 Real Estate Predictions for 2011

Freddie Mac analysts point to five features that they believe will likely characterize the 2011 housing and mortgage markets:

1. Low mortgage rates:  relatively low mortgage rates will be a feature of the 2011 mortgage market. Thirty-year fixed-rate loans are likely to remain below 5 percent throughout the year.  Deaton Interpretation:  “This means that the interest rates will actually be climbing now through next year.  If you waited for the bottom on interest rates….YOU MISSED IT!  Looking to buy?  Start now to get the current low interest rates.”

2. Prices have hit bottom. House prices are likely to begin a gradual, but sustained recovery in the second half of 2011. Deaton Interpretation:  “Prices going up.  Cost more to buy the house you want!”

3. Housing will remain affordable. With affordability high, many first-time buyers will be attracted to the housing market in the New Year, likely translating into more home sales in 2011 than in 2010.  Deaton Interpretation:  “Houses were more affordable in 2010.  Where were the first time home buyers?  They disappeared when they didn’t get free money from the government anymore.  I think more buyers will show up due to improved economy and the reality check that they missed the Perfect Storm in 2010 – low prices, high inventory and crazy low interest rates.”

4. Refinances will dwindle. 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.  Deaton Interpretation:  “Agreed….because those people who have a mortgage realized that a 3.5% interest rate was MUCH BETTER than the 5%-6% they currently had!  They acted!”

5. Delinquency rates will decline. Based on the last several business cycles, the share of loans that are 90 or more days delinquent or in foreclosure proceedings — known as the "seriously delinquent rate" — generally crests within a year of the start of the recovery in payroll employment, and this economic recovery appears to fit within that pattern. Payrolls began to rise last January, and by the spring the seriously delinquent rate had begun to fall.  Deaton Interpretation:  “Sounds good to me.  Less delinquency = better housing market for all.”

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