Due to lack of inventory and rising home prices, U.S. home sales (new and existing) are expected to decrease 0.9% this year to 6.07 million, down from 6.12 million in 2017, according to the latest forecast from Freddie Mac.
Although the U.S. economy and job market are now back to healthy levels, the housing market has essentially stalled, according to the report.
Part of the problem is that the lack of inventory has helped catapult home prices to new highs, which, in turn, is impacting affordability.
This weaker affordability, along with the ongoing supply and demand imbalance, has resulted in fewer home sales compared with last year.
Freddie Mac is now forecasting that U.S. home prices will increase by 5.5% in 2018. Although home price appreciation is expected to slow, home prices gains will continue to outpace wage growth.
For those looking to buy, it will be a challenging market for the remainder of the year, Freddie Mac says.
“The spring and summer home buying and selling season ultimately ended up being a letdown, despite a faster growing economy and healthy demand for buying a home,” says Sam Khater, chief economist for Freddie Mac, in a statement. “Unfortunately, too many would-be buyers continue to be tripped up by not enough affordable supply and the one-two punch of much higher home prices and mortgage rates.
“Prospective buyers are being squeezed the most where demand is the strongest: the entry-level portion of the market,” he adds. “While price appreciation is welcomingly starting to ease in many markets, weakening affordability continues to hamper overall activity.”
The slowdown in purchase volume coupled with decreasing refinance activity means mortgage lenders will see single-family first-lien mortgage originations slide about 9% this year to $1.65 trillion, according to Freddie Mac’s forecast.
