Freddie Mac released its forecast for 2019, predicting the housing market will see modest growth, and revealing the “great unknown” for the year ahead.
The biggest unknown for housing in 2019 are the current negative trends, according to Freddie Mac’s forecast. These trends include lack of housing supply, and whether that will persist and/or rising interest rates and if the market will adjust to the shock and resume its modest growth.
“Almost all the trends in the U.S. housing market have been negative in recent months as housing market activity continues to adjust to higher mortgage rates,” Freddie Mac Chief Economist Sam Khater said.
“If new home sales are to resume growth in 2019, builders may have to shift their focus to more modestly priced homes and smaller sized homes to help offset housing affordability concerns,” Khater said. “But with cost pressures pinching profitability, this will be a significant challenge.”
A recent forecast from realtor.com agreed affordability will be a rising concern in 2019, saying homebuyers and sellers alike will struggle next year.
Freddie Mac also forecasted 2018 will end with 3% annual GDP growth, followed by 2.4% in 2019 and 1.8% in 2020.
The total number of home sales will decrease 1.6% to 6.02 million in 2018, but then slowly gain momentum and increase 1% to 6.08 million in 2019 and 2% to 6.2 million in 20202.
Home prices will continue to increase, rising 5.1% in 2018, then moderating slightly to a growth rate of 4.3% in 2019 and falling to a growth of 2.9% in 2020.
Expect single-family mortgage originations to decline 9.9% annually to $1.63 trillion in 2018, falling slightly to $1.62 trillion in 2019 and dropping once more to $1.6 trillion in 2020. This is the result of shrinking refinance activity, Freddie Mac explained.