The market upswing helps homeowners build equity, but prices out first-time homebuyers
Freddie Mac expects mortgage rates and home prices to keep climbing in 2018, saying homeowners should see greater and greater equity.
Although the housing market upswing is a plus for homeowners, Freddie Mac said in its monthly outlook for March that increasing home prices are making it increasingly harder for first-time homebuyers to achieve homeownership.
Freddie Mac forecasts the 30-year fixed mortgage rate to average 4.9% in the fourth quarter following continuous growth. Although rates are still at historical lows, Freddie Mac said they have shown steady growth since the start of the year.
Additionally, Freddie Mac said it expects home prices to increase 5.1% this year. Prices should continue rising above the inflation rate given the ramp up in construction to meet housing demand.
"Overall, US housing markets have been on the upswing,” Freddie Mac Deputy Chief Economist Len Kiefer said. “While housing market trends have been generally favorable, not everyone has shared equally in the gains. Existing homeowners have largely seen their properties increase in value, helping to build equity. In many parts of the country, home values have more than recovered from the Great Recession, reaching new (nominal) peaks, and the share of underwater homeowners has dropped significantly."
Freddie Mac noted that home prices across the US have increased 37% since the Great Recession ended in 2009, with 2017 posting a 7% gain. As a result, homeowners have posted record gains in home equity, with the fourth-quarter total at $14.4 trillion.
