There is some evidence that the U.S. housing market has finally hit bottom – a good sign for the real estate market if it's true, and probably a driver of the current rise in mortgage rates that we’ve seen during the past few weeks.
Fannie Mae’s Economics and Mortgage Market Analysis Group has some of the best data. The group reports that total U.S. housing sales will be down 8% by the end of 2010, a level that will signal the official end of the long, painful housing downturn.
Yes, the foreclosure mess still has to be sorted out. But banks are already starting to resume foreclosure activity after getting the green light from state attorney general’s (Illinois’s Cook County is the latest region to open up home foreclosures). That’s a big reason why Fannie Mae (Stock Quote: FNM) says 2011 should see a gain in home sales.
“We expect home sales to increase by about 3% in 2011, says Fannie Mae chief economist Doug Duncan. “However, the pace of the recovery will be largely determined by labor conditions. If hiring improves at a faster pace than expected, home sales will likely see a stronger gain in 2011 and visa versa.” Fannie Mae reports that a stronger economy and an improving jobs picture should lead the way for a modest housing recovery next, the group adds.
Overall, the Fannie Mae analysis group says that gross domestic product (GDP) growth will reach 2.5%, up a few percentage points from the expected 2.2% growth by the end of 2010.
As the data on and about the U.S. housing market crystallizes, the mortgage rate market seems to be heading north. The benchmark 30 year fixed mortgage, as calculated by the BankingMyWay Weekly Mortgage Rate tracker, rose again last week. The 30 year rate rose from 4.454% to 4.603%, a fairly significant boost of 49 basis points. While that won’t happen every week, just a few more weeks of healthy 30- or 40-point spikes in the mortgage rate market and we can kiss those halcyon days of low mortgage rates goodbye.