US house prices will continue to strengthen in 2013 with most residential real estate indice rising by 2 to 3%, it is claimed.

Long term mortgage rates in the US are likely to remain near their record lows for the first half of 2013, then rising gradually during the second half of the year, but remaining below 4%, according to lender Freddie Macs latest outlook report.

The firm, which compiles data on major economic and housing and mortgage market indicators and offers forecasts based on those indicators, also predicts that homes sales will keep growing and construction increase.

It says that household formation should step up further to a net 1.2 to 1.25 million household increase in 2013 with housing starts up around the million annualized pace by the fourth quarter.

Vacancy rates for both apartments and the single family for sale market could bring aggregate vacancy rates down to 2002/2003 levels as household formation outpaces new construction.

However, while the refinance boom will continue into early 2013, it will be less compared to 2012 so it expects single family mortgage originations to decline by 15% and multifamily lending to rise by approximately 5%.

ґThe last few months have brought a spate of favourable news on the US housing market with construction up, more home sales, and home value growth turning positive, said Frank Nothaft, Freddie Mac vice president and chief economist.

ґThis has been a big change from a year ago, when some analysts worried that the looming shadow inventory would keep the housing sector mired in an economic depression. Instead, the housing market is healing, is contributing positively to GDP and is returning to its traditional role of supporting the economic recovery, he added.

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