Housing Hurdles Taint Otherwise Healthy Economy

September 25, 2018

As housing inventory increases and home prices begin to ease, the door to homeownership is opening for more buyers. But Freddie Mac economists aren’t optimistic that the real estate market will be able to break even with last year’s sales levels.

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In their September forecast, Freddie's economists point to a booming economy and job market, but point out a stalled housing market. They consider the main factors to be weaker housing affordability, constraints that are limiting homebuilding, and ongoing supply and demand imbalances from this summer.

Economists predict that many prospective buyers will continue to have difficulty breaking into the market. They are forecasting home sales for both new and existing homes to fall 0.8 percent this year and for home price growth to moderate at 5.5 percent.

“The spring and summer homebuying and selling season ultimately ended up being a letdown, despite a faster growing economy and healthy demand for buying a home,” says Sam Khater, Freddie Mac’s chief economist. “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. While price appreciation is welcomingly starting to ease in many markets, weakening affordability continues to hamper overall activity.”

Still, Freddie Mac’s report points to a economy in the second quarter that grew to its fastest pace in nearly four years, with solid consumer spending and business investment.

But weakening affordability and a lack of moderately priced homes is dampening housing activity, the report cautions. The 30-year fixed-rate mortgage averaged 4.5 percent and is expected to average 5.1 percent in 2019.

Freddie Mac outlook forecast. Visit source link for more information.

© Freddie Mac

Freddie Mac September Forecast,” Freddie Mac (Sept. 24, 2018)