Fannie Mae Chief Economist David Berson in an annual forecast projected that the interest rate of popular 30-year, fixed-rate mortgages will average 6.34 percent over the year, down from an average 6.54 percent in 2002. Rates for the long-term home loan, which are currently just over 6 percent, should rise to just under 6.5 percent by the end of the year, he said.
Low mortgage rates fueled a record year for home buying and mortgage refinancing in 2002.
Berson forecast a rebound in U.S. economic growth in 2003 as a result of low short-term interest rates, tax cuts and consumer spending helped by mortgage refinancing. The economy could get a further boost if uncertainty about whether the United States plans to attack Iraq, which the administration of President George W. Bush has accused of hiding weapons of mass destruction, is cleared up.
"The economy is likely to continue growing on average at a pace only modestly below trend as the significant stimuli from the Federal Reserve, the U.S. government and the mortgage market help to offset the significant uncertainty facing households and businesses," he said.
Berson forecast 1.641 million housing starts for 2003, down from a projected 1.686 million starts this year. His forecast calls for new home sales to slide next year to 944,000 units from what would be a record 963,000 units in 2002, and for existing home sales to slip to 5.479 million units from what would be a high of 5.538 million.
Mortgage originations should decline to $2.04 trillion next year from $2.52 trillion in 2002, Berson said. Mortgage debt outstanding is expected to grow to $6.95 trillion in 2003 from $6.4 trillion, he added.