The housing market continues to hold its ground in January, after receiving a boost from declining mortgage rates and slow home price growth at the end of 2018, according to Freddie Mac’s January Forecast.
“Despite the weakening of the housing market in 2018, early 2019 data signals a possible turnaround for the year to come,” Freddie Mac Chief Economist Sam Khater said. “This recent uptick in activity proves that homebuyers are very sensitive to changing interest rates and will likely respond positively if mortgage rates remain below 5%.”
Freddie Mac reports that after climbing for several months, the 30-year fixed-rate mortgage began to let up at the end of 2018, averaging 4.6%. In fact, mortgage rates dropped to a nine-month low of 4.45% in early January.
However, the company forecasts the 30-year fixed-rate mortgage is expected to average 4.7% in 2019 before increasing to 4.9% come 2020.
As for total home sales, Freddie predicts they will slowly regain momentum, eventually increasing to 6.09 million in 2019 and to 6.14 million in 2020.
That being said, home sales growth is expected to be driven by existing home sales, whereas new home sales will likely remain stagnant, according to the company.
Freddie also predicts that home prices will take a breather over the next two years.
“After steadily increasing for years, home prices have finally begun to cool, and while they’re still increasing, we expect the rate of growth to slow,” Freddie writes. “Home prices are expected to increase 4.1% and 2.7% in 2019 and 2020, respectively.”
As for single-family mortgage originations, Freddie says they are expected to increase 2.1% to $1.68 trillion in 2019 and hold steady in 2020.
Lastly, the company revised its forecast for refinance share of originations, now forecasting upward to 27% in 2019 and 24% in 2020.