Industry News

Freddie Mac predicts ‘soft landing’ for housing market

Economic outlook basically positive

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Citing growth in the gross domestic product, low price inflation and low unemployment, mortgage giant Freddie Mac Thursday predicted a soft landing for the U.S. housing market in 2006.   "Without question America's joy ride in the housing market is coming to an end," Freddie Mac said in its January 2006 Economic Outlook statement. "However, ... conditions are favorable for a soft landing, perhaps with a little turbulence on the approach."   The "turbulence" could be caused by a couple of factors, one of them being an inverted yield curve, the mortgage giant said. This is when short-term interest rates are lower than long-term rates, which became the case in the U.S. in December. Normally, long-term interest rates are higher than short-term rates because it's hard to predict what will happen far out in the future.   Higher short-term rates may lead to a bumpy descent for homeowners who used adjustable rate mortgages to buy their homes, Freddie Mac warned, because the inte...