Freddie Mac recently revisited 2019 forecasts for the mortgage and housing markets. Home price appreciation was higher than expected in the first quarter of 2019. Although it was only slightly higher than previously projected, it led Freddie to revise their 2019 annual forecast for home price growth to 3.6%. Not what we have seen in recent months, but a growth rate that fosters a healthy market. More moderate growth of 2.6% is projected for 2020.
Homes sales are also showing signs of recovery. Existing home sales have benefited from low mortgage rates and a healthy job market, as would be expected. Freddie expects stronger home sales and housing starts in the coming months. And builders’ recent activity seems to support this expectation. However, most of this data was compiled prior to recent trade tensions, which may increase costs of construction materials. If all goes as forecasted, it will bring full-year housing starts and sales in 2019 back to around last year’s levels.
After increasing slightly throughout April, mortgage rates declined at the start of May. Freddie sees the combined positive impact of “low mortgage rates, a strong labor market, low unemployment, and modest wage growth” supporting a previous forecast for a steadily growing housing market in 2019. Mortgage rates should continue to decline slightly and Freddie still expects 30-year fixed-rate mortgages to continue at current levels, averaging 4.3% for the balance of 2019 and increasing to 4.5% in 2020.
All in all, it’s not a bad outlook — plenty of reasonably positive news for us to take into the summer of 2019.