Nothaft noted that while prices are still falling on national levels, a growing number of local markets have already reached a bottom and are on the way back up. He also noted that the market will not have to contend with resistance from higher interest rates for at least a few years as the Fed's "Operation Twist" policy. As a result, Notham expects housing market activity to pick up in 2012, though only slightly.
The Freddie Mac economist also said that he expects the rental market to offer some support to housing next year, as rising demand for rental homes leads to the building of new multifamily housing projects, pushing total housing starts up by more than 10 percent in 2012. Additionally, improved fundamentals in the rental market could provide a boost to refinancing activity and the origination of loans for multifamily projects.
However, while multifamily loans are expected to rise, single-family originations and refinancing activity likely will not, and will possibly even decline some. With interest rates having been at or new historic lows for months, most homeowners that are able to qualify for refinancing have already locked in a lower rate, so demand for refinancing of single-family homes will decline well into next year, Nothaft said, and mortgage rates will likely begin to rise in the middle of next year, removing the financial incentive to refinance.
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