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Bring on the refis: Freddie Mac expects mortgage rates to remain low all year

The 30-year fixed-rate mortgage is projected to average 4.3% in 2019

Favorable mortgage rates are expected to boost homebuyer affordability for the remainder of 2019, according to Freddie Mac’s April Forecast.

According to the government sponsored enterprise, the 30-year fixed-rate mortgage is now projected to average 4.3% this year, falling from last year’s 4.6%.

This decline is likely to push home sales past 2018 levels, growing to an estimated 5.98 million units this year.

Beyond that, the decline in mortgage rates from last year's total is expected to drive an increase in refinances in 2019.

“While mortgage rates have risen in recent weeks, they remain lower than where they were a year ago and wage growth has accelerated and is finally growing at the same rate as home prices for the first time in seven years,” Freddie Mac Chief Economist Sam Khater said. “We expect to see the result of these low mortgage rates and stronger wage growth translate into better home sales in the coming months, along with better than expected refinance activity for the year.”

Freddie Mac expects low mortgage rates to drive an increase in single-family mortgage originations for the rest of the year. As Freddie Mac noted, those lower rates have already resulted in more refinance activity, and the GSE expects that trend to continue.

Freddie Mac said that it expects the refinance share to increase from 30% of all originations in 2018 to 33% in 2019.

Although Freddie expects home sales to thrive, the same cannot be said for its homebuilding outlook as the GSE has lowered its annual forecast to 1.26 million units.

That being said, Freddie has left its house price appreciation forecast unchanged at 3.5% this year.

“Without a doubt, these low mortgage rates and higher incomes will help homebuyers on the affordability front this spring homebuying season,” Khater said. “Unfortunately, first-time homebuyers will likely not realize as much of the benefit with such high demand and price growth for lower-priced homes.”

And Khater may be right, as Realtor.com’s latest housing survey suggests heightening homeownership demand will leave many prospective buyers grappling with housing affordability.

“The 2019 spring home-buying season will be characterized by rising home prices, a moderate pace of home sales, and an influx of inventory,” Realtor.com Chief Economist Danielle Hale said. “More homes on the market and lower mortgage rates will help offset some difficulties associated with price gains, but affordability will remain the primary challenge for shoppers, particularly in lower price segments.”

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