Freddie Mac economists said in a blog last week that the U.S. housing market will continue to see a decline in the number of refinances, while home purchases will expand in coming months.
During the first quarter of 2013, 71 percent of all mortgage originations were refinances, according to data from Freddie Mac, but the number fell to 51 percent by the end of the year. Last week, the Mortgage Bankers Association said refinances fell to the lowest level since July 2009.
Freddie Mac Chief Economist Frank Nothaft said mortgage purchase originations increased 20 percent last year and that over 50 percent of the mortgage market will be home purchases by the end of the year—a purchase-dominated market has not been seen since 2000.
Freddie Mac’s data indicates that a number of factors will help to support the emerging purchase market. Home sales are expected to increase approximately three percent this year with the rise of the purchase-dominated market.
Housing starts are expected to grow 20 percent, which may ease tight inventories in some markets, and home value increases will likely continue their momentum this year, though at a more moderate pace of five percent.
Additionally, Freddie Mac estimates that mortgage rates will continue their upward climb to reach approximately five percent by year’s end.