A recent report from Freddy Mac cooled some of the rising interest rate speculation that spooked Wall Street last week. Mortgage rates are expected to hold at around 4 percent through 2013, a 60-year historic low for the United States.
Mortgage provider Freddy Mac said this will help “to keep homebuyer affordability strong” in its most recent U.S. Economic and Housing Market Outlook.
“At today’s house prices and income levels, mortgage rates would have to be nearly 7 percent before the U.S. median priced home would be unaffordable to a family making the median income in most parts of the country,” Freddie Mac wrote. “So while rising interest rates will reduce housing demand, rates would have to increase considerably more before the reduction in demand for home purchases would be substantial across the country.”
U.S. Home sales jump in May
Meanwhile, May home sales increased by 13 percent in May, reaching its highest level since November of 2009, when a federal tax stimulus boosted transaction volumes.
May home sales totaled 5.18 million units according to the National Association of Realtors. The median sales price jumped 15 percent from last year to $208,000.
“The housing numbers are overwhelmingly positive,” Lawrence Yun, NAR chief economist, said. “However, the number of available homes is unlikely to grow, despite a nice gain in May, unless new-home construction ramps up quickly by an additional 50 percent.
Homebuilders are busy too
Lower inventory levels in May have homebuilders rushing to meet rising demands. They’re now on track to construct 914,000 new housing units by the end of the year, a 28.6 percent increase from 2012.
While most of the activity is focused on multi-unit apartments and condominiums — a 69.1 percent spike from May 2012 — single-home construction levels increased 16.3 percent nationwide as well.