The January 2018 outlook from Freddie Mac sets a mostly positive tone for the economy and the housing market but there’s an elephant in the room
The January 2018 outlook from Freddie Mac sets a mostly positive tone for the economy and the housing market but there’s an elephant in the room.
"Starting off the year, things are looking pretty good for the U.S. economy and housing markets. Mortgage rates are low, economic growth has accelerated in recent quarters, and housing is coming off its best year in a decade,” says Freddie Mac deputy chief economist Len Kiefer.
Those positives include home sales, construction and prices all forecast to be slightly higher in 2018 than in 2017; and expected economic growth of 2.5% (down from 2.6% for 2017).
However, income growth is unlikely to keep pace with house prices which will further weaken affordability.
Too many young Americans live with their parents
Young Americans should be preparing to move from renting into homeownership but 15% of the current ‘next-gen’ homebuyers (as of 2016) are saddled with large student debts which, together with rising home prices, is persuading more to stay at home.
Freddie says that in 2000, 10% of young Americans (25-35) were living at home with parents, so there was a 5-percentage-point rise during the 16 years that followed.
How they will be able to afford to get on the property ladder is one of the questions for Kiefer and the team.
Recession ahead?
And then there’s the potential for recession.
Freddie Mac is not expecting an imminent downturn but the report says it will be keeping an eye on indicators of a potential recession including the unemployment rate and US Treasury yield curve.
It says that if the yield curve becomes inverted and unemployment remains below the natural rate, then history shows that a recession is likely within 2-3 years.
"Starting off the year, things are looking pretty good for the U.S. economy and housing markets. Mortgage rates are low, economic growth has accelerated in recent quarters, and housing is coming off its best year in a decade,” says Freddie Mac deputy chief economist Len Kiefer.
Those positives include home sales, construction and prices all forecast to be slightly higher in 2018 than in 2017; and expected economic growth of 2.5% (down from 2.6% for 2017).
However, income growth is unlikely to keep pace with house prices which will further weaken affordability.
Too many young Americans live with their parents
Young Americans should be preparing to move from renting into homeownership but 15% of the current ‘next-gen’ homebuyers (as of 2016) are saddled with large student debts which, together with rising home prices, is persuading more to stay at home.
Freddie says that in 2000, 10% of young Americans (25-35) were living at home with parents, so there was a 5-percentage-point rise during the 16 years that followed.
How they will be able to afford to get on the property ladder is one of the questions for Kiefer and the team.
Recession ahead?
And then there’s the potential for recession.
Freddie Mac is not expecting an imminent downturn but the report says it will be keeping an eye on indicators of a potential recession including the unemployment rate and US Treasury yield curve.
It says that if the yield curve becomes inverted and unemployment remains below the natural rate, then history shows that a recession is likely within 2-3 years.
