Home sales growth is expected to slow through the remainder of the year, as a lack of affordability and supply contribute to a continual slowdown, according to Freddie Mac’s August Forecast.
During the second quarter of 2018, the U.S. economy grew at its fastest pace within the last four years, according to the report. However, housing activity played a limited role in this growth.
New home construction, existing-home sales and sales of new homes declined last quarter, due to homebuilder challenges including limited inventory and steady price gains, according to Freddie Mac.
Furthermore, recent data collected from the National Association of Home Builders/Wells Fargo Housing Opportunity Index revealed housing affordability has now reached a 10-year low in the second quarter of 2018.
Freddie Mac Chief Economist Sam Khater said the housing market hit some speed bumps this summer, as pricy homes and mortgage rates continue to hinder prospective homebuyers.
Khater said these challenges were predominantly seen in expensive markets out West, where demand and sales were dampened due to weakening affordability.
Freddie Mac said that limited inventory is continuing to impact home sales and prices. Home sales are predicted to modestly increase to 6.14 million, according to the forecast.
Mortgage rates are expected to average 4.6% for the rest of 2018. Slower home sales growth and decreasing refinance activity are expected to cause single-family first-lien mortgage originations to fall 8% to $1.66 trillion this year.
Lastly, the labor market and the U.S. economy are expected to climb 2.8% this quarter and 2.7% this year, ultimately increasing consumer spending and business investment.
“The good news is that the economy and labor market are very healthy right now, and mortgage rates, after surging earlier this year, have stabilized in recent months, Khater said. “These factors should continue to create solid buyer demand, and ultimately an uptick in sales, in most parts of the country in the months ahead.”