Spike in interest rates won't derail housing recovery: Freddie Mac

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Despite worries that a recent spike in interest rates catalyzed by indications that the Fed may scale back its bond-buying could erode homebuyer demand, the real estate market is still likely to continue to improve in 2013, Freddie Mac said in its latest U.S. Economic and Housing Market Outlook report.

“The housing recovery keeps chugging along despite the recent market hysterics around Taper Talk, which caused mortgage rates to jump over the past month,” said Frank Nothaft, vice president and chief economist at Freddie Mac. “We won’t know the immediate impact on the pop in mortgage rates for another couple months. However, we don’t expect them to stall the housing recovery because demand is strong, supply is limited and housing affordability remains strong in most markets for most families.”

Through May, home sales had registered their fastest first-half year pace since 2007, with existing-home sales up over 10 percent compared with the first five months of 2012, and new-home sales up 29 percent, according to Freddie Mac. In the second half of the year, home sales should increase (new and existing) an additional 2 percent relative to the first half, the report said.

The report also forecast that new-home construction would increase by 12 percent in the second half of the year relative to the first half.

Meanwhile, the rapid rise in home prices is likely to cool as the year progresses, the mortgage giant said. With prices having likely jumped by 5 percent in the first half of the year, they are likely to grow closer to 3 to 4 percent in the second half, and post a gain of 8 to 9 percent for the calendar year. Source: Freddie Mac