Recession over, chief economist at Freddie Mac says

Real Estate Watch

March 17, 2002

As sales of existing homes hit a record 6.9 million in January, and with other economic indicators showing growth, the chief economist at Freddie Mac said he believes the recession is over.

"With mortgage rates averaging one-eighth of a percentage point lower in February, the continued vitality of housing demand is assured," said Frank Nothaft of Freddie Mac, the federally chartered company that supplies lenders with funds by purchasing mortgages.

Nothaft said in a report that he expects long-term interest rates to remain low because of expected low inflation.

Among other forecasts, Nothaft said:

Thirty-year, fixed-rate mortgages should continue to range between 6.5 and 7.5 percent, with the average rate for this year at 7 percent.

Housing starts, which hit an annualized rate of 1.68 million in January, are too high to be sustained. Overall, 1.6 million housing starts are expected this year.

Home prices should appreciate by 3 percent this year, Freddie Mac predicts.

Mortgage originations for single-family homes are expected to be 20 percent lower than last year because of an expected drop in refinancing. Originations are expected to total $1.4 trillion.

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