Report: Real estate market to improve in 2011

The Houston real estate market has seen slow home sales over the past few months following the expiration of the first-time homebuyer tax credit. But Frank Nothaft, the chief economist at Freddie Mac, says that continued housing affordability should help the market grow next year.

Nothaft says that affordable housing is driven by incomes, home prices and mortgage rates. While incomes are down for many people still reeling from the recession, the extremely low levels of both home prices and interest rates have created one of the best homebuying climates in the last 40 years.

He adds that while home prices are expected to grow by about 1 percent next year as home sales pick up, mortgage rates are likely to remain low throughout 2011, with the average interest rate for a 30-year fixed-rate mortgage expected to stay lower than 5 percent throughout the year. Those conditions, he says, should bring more first-time buyers out of the woodwork and into the market.

Average Houston homes are within reach for many local families. According to the National Association of Home Builders, 72.5 percent of homes sold in the region during the third quarter were "affordable" for a family making the median income.