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Buying a Home; 2011 Opens the Door for Home Buying Affordability
Freddie Mac analysts point to five features that they believe will likely characterize the 2011 real estate markets:
- Advantageous home loan rates. With Fed observers expecting the central bank to keep the federal funds rate at its current target range of 0% to 0.25% for most or all of 2011, advantageous rates will be a feature of the 2011 market. Thirty-year fixed-rate loans are likely to remain below 5.0% throughout the year, and initial rates of 5/1 hybrid adjustable-rate loans will likely remain below 4.0% in 2011.
- House prices have hit bottom. Prices are likely to begin a gradual, but sustained recovery in the second half of 2011.
- Housing will remain affordable. With affordability high, many first-time buyers will be attracted to the housing market next year, likely translating into more home sales in 2011 than in 2010.
- Refinances will dwindle. Many eligible borrowers have already refinanced. While fixed-rates are likely to remain low, they will move up gradually.
- 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 generally crests within a year of the start of the recovery in payroll employment. Payrolls began to rise last January, and by the spring delinquency rates had begun to fall.
Source: Freddie Mac
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