Housing remains a bright spot for the economy in October. It’s not a statement you expect to hear as we look at the rising home prices and dwindling inventory, but it’s exactly what Freddie Mac stated today in its monthly Outlook for October.
Consumer spending will boost a better half in 2016 for gross domestic product leading to an annual growth of 1.6%, according to the report. Growth in 2017 will be slightly better at 1.9%.
The economy is still struggling to meet the Feds expectations. Consumer price inflation remains well below the Federal Reserve’s 2% target. The consumer price index increased 1.5% annually in September, while the Federal Reserve’s preferred metric of consumer price inflation, the core personal consumptions expenditure price index, rose 1.6% annually in August.
“Worldwide economic growth is weak and its prospects have gotten worse,” Becketti said. “This may all sound familiar because we’ve been here before… last year.”
While that may be true, the same can't be said about housing. In fact, Becketti calls the housing market a “bright spot” in the economy in an economy that is otherwise stalled.
Mortgage rates aren’t going to spike any time soon, but will rise gradually in 2016 and 2017, the report states. The 30-year fixed rate mortgage will average 3.9%.
For now, mortgage interest rates rose for the second week in a row to their highest level in four months to 3.52%, now hitting pre-Brexit levels, according to Freddie Mac’s weekly survey.
“We see new home sales improving some next year driven by increases in new single-family housing construction which will push total home sales slightly higher,” Becketti said.
Existing home sales increased in September driven mainly by the drastic increase in first-time homebuyers, which reached the highest share of homebuyers in four years, according to a new report from the National Association of Realtors.
Also, foreclosure inventory in August declined significantly from last year, hitting its lowest point since the housing boom, according to the August 2016 National Foreclosure Report from CoreLogic, a property information, analytics and data-enabled solutions provider.