Freddie Mac: Single-family originations to decline in 2018

Freddie Mac forecasts single-family mortgage originations to decline 9.9% year-over-year to $1.63 trillion in 2018 as a result of shrinking refinance activity.

Single-family originations are also expected to fall slightly to $1.62 trillion in 2019 and to drop once more to $1.60 trillion in 2020, the company said in its forecast for November.

Freddie Mac said the biggest unknown about the housing market in 2019 is whether current negative trends will persist or the market will adjust to higher mortgage rates and resume modest growth.

“Almost all the trends in the US housing market have been negative in recent months as housing market activity continues to adjust to higher mortgage rates,” Freddie Mac Chief Economist Sam Khater said. “If new home sales are to resume growth in 2019, builders may have to shift their focus to more modestly priced homes and smaller sized homes to help offset housing affordability concerns. But with cost pressures pinching profitability, this will be a significant challenge.”

Freddie Mac said it expects total home sales to decrease 1.6% to 6.02 million in 2018 before slowly regaining momentum and increasing 1% to 6.08 million in 2019 and 2% to 6.20 million in 2020. Home prices are forecast to increase by 5.1% in 2018 with the rate of growth moderating to 4.3% in 2019 and 2.9% in 2020.