The company expects long-term mortgage rates to rise gradually in the second half of 2013, but to remain below 4%, according to its U.S. Economic and Housing Market Outlook.

Freddie Mac sees house prices continuing to rise next year, with most U.S. house price indexes increasing by 2% to 3%. The company expects household formation to increase households by 1.2 million to 1.25 million in 2013, with housing starts reaching an annualized pace of roughly one million by the fourth quarter.