Low mortgage rates are predicted to accelerate home sales growth.
Although the nation’s trade war is projected to weaken future economic growth, Freddie Mac’s September Forecast indicates the housing market is likely to maintain its strength well into the fall.
“Despite fears of an economic slowdown, the housing market continues to be a bright spot in the economy,” said Sam Khater, Freddie Mac’s chief economist.
“While mortgage rates have ticked up in recent weeks, they remain lower than they were a year ago which will help boost sales headed into the fall.”
According to the government-sponsored enterprise, U.S. GDP will average 2.2% in 2019, edging down to 1.8% come 2020.
The 30-year fixed-rate mortgage, which dropped to a 3-year low in August, will remain below 4% for the remainder of 2019.
“Concerns over the resolution of trade disputes have injected volatility into global bond markets. Investors have flocked to the safety and stability of U.S. Treasuries, pushing down interest rates,” the GSE writes.
“As trade talks ebb and flow, rates follow. Despite the volatility in rates, we expect long-term rates to remain flat on average.”
According to Freddie Mac, the 10-year yield is expected to average 1.8% in 2020, falling from an annual average of 2.1% in 2019.
The company says these low rates will continue to boost home sales, as mortgage origination levels are predicted to climb to $2.1 trillion and $1.8 trillion in 2019 and 2020, respectively.
Given the combination of increased housing demand and a projected upward tick in housing supply, Freddie Mac expects home sales to rise to 5.98 million in 2019, before reaching around 6.03 million in 2020.
“Lower rates have boosted the housing market. Housing starts in August 2019 beat consensus estimates, increasing to 1.36 million units at an annual rate. The August level was the highest since 2007,” Freddie Mac writes. “Higher starts should provide some desperately needed new housing supply. We forecast annual housing starts to average 1.25 million in 2019, increasing to 1.28 million in 2020.”
Courtesy HousingWire newsletter.
