Today, Frank Nothaft and Leonard Kiefer, the Chief and Deputy Chief Economists for Freddie Mac, released their prediction that the single-family mortgage market will transition from a refinance driven market to a purchase driven one. The expected creation of jobs coupled with a slow development in new housing leaves Freddie Mac to conclude that inventory next year will be filled quickly. This will be the first time since 2000 that the market will be purchase driven.
As the price of housing increases and the number of available refinance candidates decreases, purchase-money lending is estimated to increase. Despite the anticipation of rising interest rates of close to 5% by the end of next year, home sales are expected to increase by 5%. According to Nothaft and Kiefer, the for the majority of the country, when calculating the income and home prices of the majority of the country, the rise in interest rates will not be great enough to offset recovery.
In a market where a housing demand may exceed supply and interest rates are expected to increase, subprime borrowers after foreclosure or short sale may feel anxiety about qualifying for another home purchase. There are, however, still several options both now and in the coming year for those seeking home ownership after foreclosure or short sale, and lenders that specialize in those options.
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