Lower than expected mortgage rates and moderating home prices are projected to heat up the spring home-buying season, according to Freddie Mac’s March Forecast.
However, the government sponsored enterprise has a less optimistic outlook when it comes to the annual GDP growth rate.
Freddie now predicts GDP growth will reach 1.2% in the first quarter of 2019, rising to 2.0% for the remainder of the year. Unfortunately, the entity expects the rate to eventually edge down to 1.8% by 2020.
And when it comes to the U.S. labor market, the forecast indicates unemployment will drop to 3.8% in 2019 before eventually increasing to 3.9%.
That being said, Freddie does believe rates on the 30-year fixed-rate mortgage will average 4.5% this year, eventually rising to 4.8% in 2020.
This could bring the housing market some much-needed momentum.
“The real estate market is thawing in response to the sustained decline in mortgage rates and rebound in consumer confidence – two of the most important drivers of home sales,” Freddie Mac Chief Economist Sam Khater said. “Rising sales demand coupled with more inventory than previous spring seasons suggests that the housing market is in the early stages of regaining momentum.”
In fact, Freddie says housing starts will grow within the next two years, increasing to 1.27 million units this year and 1.33 million units next year.
And lower mortgage rates are expected to accelerate growth of total home sales, as they move forward to 5.94 million in 2019 and to 6.14 million in 2020, according to Freddie.
Home prices are also expected to increase, reaching 3.5% and 2.5% in 2019 and 2020, respectively.
As for the remainder of 2019, Freddie predicts single-family mortgage originations will rise by 1.6%, equating $1.67 trillion. Notably, this will also be the similar rate in the following year.
