Freddie Mac: Low Mortgage Rates, Strong Labor Market to Boost Home Sales

0

Low mortgage rates along with a strong labor market will help boost home sales and origination volume over the next year and a half, Freddie Mac’s most recent economic forecast shows.

“Concerns about global growth and ongoing trade disputes have pushed long-term interest rates lower, resulting in mortgage rates seeing their lowest level since fall 2017,” says Sam Khater, chief economist for Freddie Mac, in the report. “These low mortgage rates, combined with strengthening homebuilder confidence and an increase in the level of housing permits, are expected to translate into stronger housing starts and increased home sales for the remainder of the year.”

Freddie Mac is currently forecasting that trade tensions and the waning effects of last year’s fiscal stimulus will put downward pressure on economic growth in 2019. These factors will restrict annual GDP growth to 2.2%.

Thanks to lower mortgage rates, refinance volume is forecast to increase 20% in 2019 compared with 2018.

The big wild card, of course is supply. Currently, Freddie Mac is forecasting that housing starts will increase to 1.26 million in 2019 and 1.35 million in 2020.

Partly as a result of this increase in construction activity, but more due to lower rates and a strong labor market, home sales are expected to rise to an annual rate of 6.03 million in 2019 and 6.19 million in 2020.

Mortgage rates will follow Treasury yields with the annual average rate for a 30-year falling to 4.1% in 2019 before increasing modestly to 4.2% in 2020.

Leave a Comment
Your email address will not be published. Required fields are marked *

avatar
  Subscribe  
Notify of