What’s the forecast for the housing market next year? Analysts at Freddie Mac take a look at the current economy, where it’s headed and how it will affect housing in 2015.

In its U.S. Economic and Housing Market Outlook report, the agency predicts that the home purchase market will continue strengthening along with the broader economy during 2015.

“The good news for 2015 is that the U.S. economy appears well poised to sustain about a 3 percent growth rate in 2015 — only the second year in the past decade with growth at that pace or better. There are several reasons for the better macroeconomic performance,” said Frank Nothaft, Freddie Mac vice president and chief economist. “Governmental fiscal drag has turned into fiscal stimulus, lower energy costs support consumer spending and business investment, further easing of credit conditions for business and real estate lending support commerce and development, and more upbeat consumer and business confidence, all of which portend faster economic growth in 2015. And with that, the economy will produce more and better-paying jobs, providing the financial wherewithal to support household formations and housing activity.”

Five trends to expect in 2015

  1. Expect to see interest rates climb throughout 2015, with yields on the 10-year Treasury averaging about 2.9 percentage points, up from about 2.6 percentage points in 2014, and rates on the 30-year fixed mortgage gradually climbing, averaging 4.6% and rising to 5% by the end of next year.
  2. Projecting annual house price gains to slow from 9.3% in 2013, to 4.5% in 2014 and 3%  in 2015. Continued house price appreciation and rising mortgage rates will dampen homebuyer affordability. Historically speaking, that’s moving from very high levels of affordability to high levels of affordability.
  3. Forecasting total housing starts to increase by 20% from 2014 to 2015 and expecting to see total home sales to increase by about 5% over that time period to the best sales pace in eight years.
  4. Expect single-family originations to fall an additional 8% from 2014 to 2015 to $1.1 trillion annualized as increases in purchase-money lending are insufficient to offset a drop in refinance. Refinance is expected to make up just 23% of originations in 2015.
  5. Multifamily mortgage originations have risen about 60% between 2011 and 2014, and further increases in volume are anticipated in 2015, up about 14% in 2015 over 2014.

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