Freddie Mac Forecasts Stronger Home Sales, Housing Starts

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Freddie Mac is forecasting low mortgage rates, low unemployment, rising wages and moderating home prices for the remainder of 2019, resulting in a favorable forecast for the housing market.

The only factor potentially holding things back? Low inventory, once again.

“Unfortunately, the housing starts forecast remains unchanged. Downward revisions to January and February data effectively lower the 2019 annual forecast to 1.26 million units,” the company says in its May economic forecast.

Still, the company’s May forecast is “largely unchanged” compared with April.

“We still expect stronger home sales and housing starts in the coming months due to favorable market conditions and accelerating wage growth,” says Sam Khater, chief economist for Freddie Mac, in a statement. 

“Additionally, our quarterly report on refinance activity shows that few U.S. homeowners are choosing to tap into their largest source of wealth despite having a record $16 trillion in home equity available to them,” Kahter adds. “Most homeowners remain reluctant to increase their mortgage balance, whereas we continue to see balance increases on auto loans, credit cards, and student loans.”

Currently, Freddie Mac is forecasting that the average rate for a 30-year fixed-rate mortgage will be around 4.3% for 2019, below last year’s average of 4.5%.

Total home sales are forecast to reach 5.98 million units, up from last year.

Home prices are expected to grow to 3.6%.

Single-family mortgage originations are expected to increase for the remainder of 2019, with refinance volume up 30% and purchase volume up 33% compared with 2018.

In the first quarter, an estimated $16.6 billion in net home equity, adjusted for inflation in 2018 dollars, was cashed out during the refinance of conventional prime-credit home mortgages, down from $19.1 billion a year earlier.

“Cash-out” borrowers represented 76% of all refinance loans in the first quarter, down from 82% at the end of 2018.

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