NEW YORK – Freddie Mac (FRE) Thursday predicted U.S. home prices will rise 8 percent in 2005, fueled by strong sales and upward momentum in home values.
"Strong home sales and higher home values should propel purchase money mortgage originations to another record high next year," said Amy Crews Cutts, Freddie Mac deputy chief economist, in a statement.
Home prices climbed at a 16 percent annualized pace in the third quarter and ended the quarter up 12.4 percent from a year earlier, according to the housing finance provider's "conventional mortgage home price index," which is calculated quarterly.
"The CMHPI regional series has shown house price appreciation in every Census division for 32 consecutive quarters," Cutts said.
She predicted home prices are likely to stop rising at such a rapid rate but not drop, which happens when an asset price bubble bursts.
"I am hesitant to use the word bubble because the fundamentals are still strong, but it is hard to believe that these very large increases will continue," Cutts said.
Earlier on Thursday, Freddie said fixed 30-year mortgage rates (search) averaged 5.81 percent, excluding fees, in the latest week, and one-year adjustable rates averaged 4.19 percent.
"The cumulative effect of two years in which 30-year fixed mortgage rates (search) averaged just 5.8 percent and an improving employment picture this year have buoyed the housing market to new highs," said Frank Nothaft, Freddie Mac's chief economist, in the statement on home prices.