Despite the slowdowns this year, 2017 is still on track to be the best year for housing in a decade, according to Freddie Mac’s November 2017 Outlook.
Freddie Mac explained this year’s modest economic growth, robust jobs gains and low interest rates made the environment more favorable for mortgages. But despite these factors, the housing market began to stall in the summer and fall this year due to a lack of affordable homes for sale.
And Freddie Mac doesn’t expect the favorable environment to continue, saying the next couple of years will see interest rates begin to increase.
“It's unlikely the economic environment will be much more favorable for housing and mortgage markets in 2018 and 2019,” Freddie Mac Chief Economist Sean Becketti said. “We forecast that interest rates will remain low by historical standards, but gradually creep higher over the next two years.”
Freddie Mac decreased its prediction slightly to just 1.2 million housing starts in 2017. Back in September, the mortgage giant said it expected housing starts to come in at 1.22 million for the year.
It also predicted 6.13 million home sales in 2017, saying that despite the rough second half of the year, it is still on track for the best year in housing in a decade. Even amid the rising interest rates and other struggles to come in 2018, Freddie Mac forecasted sales will continue increasing in 2018 and 2019.
Next year, Freddie Mac predicts housing construction will gradually pick up, helping supply more homes in inventory-starved markets.
“We also forecast that housing construction will gradually pick up, helping to supply more homes to inventory-starved markets,” Becketti said. “More housing supply and modestly higher rates will lead to a moderation in house price growth. Refinance activity will drop to very low levels and the mortgage market will be dominated by purchase activity.”