Low mortgage rates will boost refinance volume in 2019, however, the inventory shortage will dampen purchase volume, Freddie Mac’s most recent economic forecast predicts.
Total origination volume is forecast to reach $1.8 trillion this year – however, it will dip to $1.7 trillion in 2020, according to the report.
“We expect to see stronger housing starts and increased home sales for the remainder of the year as homebuyers benefit from very attractive mortgage rates, lower prices at the gas pump, plus a gradual bump up in wages,” says Sam Khater, chief economist for Freddie Mac, in a statement. “While this affordability boost is welcomed, rising demand in the face of limited homes for-sale is likely to put even more upward pressure on house prices.”
Currently, Freddie Mac is predicting GDP growth of 2.1% as trade tensions and the waning effects of last year’s fiscal stimulus put downward pressure on growth.
Mortgage rates are forecast to follow Treasury yields, with the 30-year fixed-rate mortgage averaging 4.1% in 2019, before decreasing modestly to 4.0% in 2020.
Home prices are expected to increase an average of 3.4% in 2019.
Housing starts are forecast to reach 1.26 million this year, but will surge to 1.34 million in 2020, as builders work to meet the pent-up demand.
Freddie Mac forecasts that home sales will reach 6.00 million in 2019, but will jump to 6.12 million in 2020 as builders bring more inventory online.