Despite challenges, Freddie Mac expects homes sales to grow this year
Total mortgage loan originations are expected to slow down in 2018 as increasing mortgage rates are forecast to pressure refinancing activity despite not having a large impact on homebuyer demand or sales, according to the June forecast released by Freddie Mac.
Freddie Mac expects originations to decline by 6.4% to $1.75 trillion. The forecast comes in spite of an expected increase in purchase origination volume.
While the first half of 2018 saw strong homebuyer demand, the supply-demand imbalance is holding back sales and pushing home prices to increase at a swift rate. Amidst challenges of higher mortgage rates and home prices as well as and meager levels of new and existing homes for sale, Freddie Mac is forecasting total home sales in 2018 to increase 2.8% to 6.29 million.
Also, even as mortgage rates rise, Freddie Mac said home prices should increase 6.6%.
“Homeowners have come out on top as the housing market’s shining star in the first six months of the year, as rising home values continue to build their household wealth, and those who decided to sell likely found a buyer very quickly,” Freddie Mac Chief Economist Sam Khater said. “Meanwhile, prospective buyers are active and looking in most markets, but supply is very low, competition is swift, and higher mortgage rates and home prices are squeezing the budget of some prospective buyers. This market reality continues to dampen sales growth.”
Khater also said that there is a shift underway among lenders to focus on the purchase market given the tumble in refinances.
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