Housing Market Forecast as Bright Spot in Worrisome Economy
October 2, 2019
Americans are growing concerned by the growing threats of an economic slowdown, but that doesn’t seem to be affecting housing. Recent housing reports are showing that lower mortgage rates are buoying buyer demand into the fall months.
“Despite fears of an economic slowdown, the housing market continues to be a bright spot in the economy,” says 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.”
Freddie’s forecast follows on the heels of several housing reports last week that suggested a solid housing market. Existing homes rose to the highest level in 17 months in August, according to the National Association of REALTORS®’ latest report. More new homes are entering the pipeline as well: Housing starts and building permits surged to a more than 12-year high in August, the U.S. Commerce Department reports. Further, for the second time in three months, new-home sales rose above 700,000 as more home buyers weigh new-home construction. (Read: Home Sales Up for Second Consecutive Month and More New Homes Are Entering the Pipeline)
Freddie Mac economists predict that the 30-year fixed-rate mortgage will remain below 4% for the remainder of this year, which could continue to bode well for the housing market to ease affordability concerns somewhat for potential buyers. With lower mortgage rates, economists are predicting that home prices will also moderate, appreciating at 3.4% in 2019, which is in line with long-term growth.
With rising housing demand and a projected slight uptick in inventory, economists forecast that home sales this year will be slightly higher at 5.98 million in 2019 and next year reach near-2017 levels of 6.03 million.
Much of the high demand in the housing market lately has been coming from young adults. “The millennial cohort has now entered the housing market in force and is already driving major changes in buying and selling patterns,” Frank Martell, president and CEO of CoreLogic, said in a statement about its latest housing index that showed home prices moderating. “Almost half of the millennials over 30 years old have bought a house in the last three years. These folks are increasingly looking to move out of urban centers in favor of the suburbs, which offers more privacy and a greener environment. Perhaps most significantly, almost 80% of all millennials are confident they will become homeowners in the future.”
Updated: October 21, 2019