According to Freddie Mac's U.S. Economic and Housing Market Outlook for February 2015, short-term interest rate policy changes are having an impact on the U.S. housing market in light of the existing substantial downward pressure currently on long-term interest rates.
Freddie Mac's chief economist Len Kiefer said, "Despite the fact the yield curve has flattened, we remain optimistic about the course of the domestic U.S. economy over the next year. We also do not foresee a major turnaround in the global growth picture and therefore recent trends in foreign buying of long-term U.S. securities activity should continue. That means continued downward pressure on long-term interest rates here in the U.S. Even if the Federal Reserve begins raising short-term rates later this year, don't expect to see long-term rates -- including mortgage rates -- increase much. This is great news for housing markets, especially headed into the spring home buying season. Lower rates help to offset some of the recent increases in house prices and keep homebuyer affordability high."
Lowered our overall projection of first quarter growth to 2.5 percent from 3.0 percent last month and lowered 2015 annual growth by 0.1 percentage points to 2.9 percent for the year.
Forecasts for home sales (5.6 million in 2015) and housing starts (1.18 million in 2015) are unchanged from last month.
Due to continued strong growth in house prices and relatively low inventories, expect house prices to increase 3.9 percent in 2015, up from our forecast of 3.5 percent last month.
Raised 2015 originations forecast to $1.3 trillion from $1.2 trillion last month.
Revised the average 30-year fixed-rate mortgage rate forecast for 2015 down to 3.9 percent for the year, compared to 4.2 percent last month.