Economy, labor market won’t be enough to offset barriers
Continued supply and affordability issues will remain factors in a challenged housing market in 2019.
Fannie Mae and the Strategic Research Group have released their forecasts for 2018 and 2019 which calls for a slower pace of growth for the economy and housing market.
The economy grew 3.5% in the third quarter of 2018, down from the 4.2% pace of the previous quarter, and the forecast is for 2.6% in Q4 2018 and 2.3% in 2019 as higher interest rates and lower impact of fiscal stimulus make an impact.
“We expect the economy to continue to receive strong support from government spending, at least in the near term,” said Fannie Mae Chief Economist Doug Duncan. “Looking further ahead, the Bipartisan Budget Act of 2018 should continue to boost growth through the first half of 2019 before it begins to fade, ultimately acting as a drag on the economy in the second half of 2020."
He added that the strength of the labor market was not enough to boost the housing sector.
Rising mortgage rates amid buyers’ concerns
“Both new and trade-up home buyers remain discouraged by rising mortgage rates, elevated home prices, and a shortage of available inventory, particularly in the lower tier of the market," said Duncan.
Duncan says that the costs of construction for homebuilders is also challenging the market.
“Given weak housing data over the past month, we lowered our 2018 originations forecast by $11 billion to $1.624 trillion and our 2019 forecast by $21 billion to $1.603 trillion. However, we expect that existing and new home sales will stabilize in 2019 as home price appreciation moderates and mortgage rates begin to stabilize."
