Home sales on track to post 2018 gain

Sales of new and existing homes are on track to post a 3.3% increase in 2018 as the healthy economy and strong consumer confidence are expected to offset challenges to ownership, according to the monthly outlook released by Freddie Mac for May.

Freddie Mac noted that homebuyers have had to deal with rising prices, increasing rates, and limited supply since the beginning of the year.

“While this spring’s sudden rise in mortgage rates are taking up a good chunk of the conversation, it’s the stubbornly low inventory levels in much of the country that are preventing sales from really taking off like they should be,” Freddie Mac Chief Economist Sam Khater said. “The underlying demand for buying a home is holding up and will continue to do so, as long as the economy is generating solid job and income growth. Most markets simply need a lot more new and existing supply to cool price growth and give buyers enough choices.”

Freddie Mac forecasts total home sales this year to reach 6.32 million. Growth continues to be restricted by low supply, which also puts upward pressure on price appreciations despite strong demand. Additionally, home prices are expected to rise 7% in 2017 even as the uptick in mortgage rates is also expected to continue. Freddie Mac estimates the 30-year fixed-rate mortgage to average 4.9% by the end of the year.

Originations are expected to drop by about 6% in 2018 to $1.75 trillion. Freddie Mac said the expected increase in purchase origination volume should be offset by the negative impact of higher mortgage rates on refinance activity.

Related stories:
First-time homebuyers pull back in Q1
There's so little choice that buyers aren't buying