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Freddie Mac raises forecast for home sales


Freddie Mac, the second-largest U.S. mortgage financier, has raised its forecast for home sales and mortgage lending this year, saying borrowing costs that are near record lows will keep fueling demand.

Freddie Mac said 6.98 million new and existing houses will sell this year, 1.2 percent more than its forecast last month of 6.90 million. Mortgage lending will fall to $2.2 trillion from a record $3.7 trillion last year, the company said. Earlier, it had forecast $2.1 trillion.

Mortgage rates might rise only slightly, which would keep sales higher than previously projected and make for the second-best housing year on record, said Frank Nothaft, Freddie Mac's chief economist.

The rate for the average 30-year fixed mortgage will be about 6 percent this year, rising from 5.8 percent last year, Nothaft said.

Higher rates "will choke off some construction and sales activity at the margin," Nothaft said in a statement. Sales this year will be "well above the level of 2002, which was regarded as an exceptional housing year at the time," he said.

House prices are likely to be 6 percent higher this year, in line with the outlook a month ago, Nothaft said.

Last year's sales of new and existing homes probably will reach 7.18 million, 9.8 percent more than the record 6.54 million sold in 2002, according to the Freddie Mac report.

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