A robust economy has not been able to ignite an underwhelming housing market, according to Freddie Mac’s September Forecast.
According to the U.S. Bureau of Economic Analysis, real gross domestic product increased at an annual rate of 4.2% in the second quarter of 2018. This is the fastest pace of growth in nearly four years.
However, ongoing supply and demand imbalances, a lack of affordability and homebuilder constraints are predicted to move home sales below last year’s level.
Freddie Mac forecasts that total home sales are expected to decrease 0.9%, and home price growth will moderately increase at a rate of 5.5%.
New and existing home sales are forecasted to decrease from 6.12 million in 2017 to 6.07 million in 2018. This is still at a pace above inflation.
For the remainder of 2018, prospective homebuyers are expected to experience difficulty reaching the market, according to Freddie Mac.
“The spring and summer home buying and selling season ultimately ended up being a letdown, despite a faster growing economy and healthy demand for buying a home,” Freddie Mac Chief Economist Sam Khater said. “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,” Khater added. “While price appreciation is welcomingly starting to ease in many markets, weakening affordability continues to hamper overall activity.”
Freddie Mac said that mortgage rates are expected to average 4.5% for the rest of 2018 and come in at 5.1% in 2019.
Lastly, decreasing refinance activity and home sales from 2017 are expected to cause single-family first-lien mortgage originations to fall around 9% this year to $1.65 trillion.