Housing market slows in first half of 2018

But total sales activity is still expected to exceed 2017 levels

By Francis Monfort

24 Jul 2018

Although the housing market slowed down in the first half of the year as supply remained exceptionally low and affordability declined, 2018 sales activity is still expected to slightly top year-ago levels, according to Freddie Mac’s July forecast.

The spring buying season saw considerable interest in buying a home in most of the country as the economy remained at healthy levels and the labor market proved to be robust. However, sales activity kept steady despite strengthening demand as would-be buyers saw their budgets squeezed by scant listings, swift home price growth, and higher mortgage rates.

“Home sales have mostly moved sideways for much of the year, but given the sizeable demand for buying in most markets, there’s hope for a small breakout in the months ahead,” Freddie Mac Chief Economist Sam Khater said. “Mortgage rates have stabilized in recent months, and in some high-cost markets, price appreciation is showing some signs of easing. If new and existing housing supply can increase meaningfully, sales will follow.”

Freddie Mac expects a slight improvement in conditions as the market head into late summer. Total sales of new and existing homes are forecast to increase 2.5% in 2018 to 6.27 million, with new-home construction expected to help alleviate the supply shortage. Meanwhile, home prices are expected to grow 6.7% despite this year’s higher mortgage rates.

Total single-family first-lien mortgage originations are expected to slide around 7% this year to $1.69 trillion, driven by decreased refinance activity due to higher borrowing costs. The 30-year fixed-rate mortgage is forecast to average 4.6%.