Freddie Mac predicted that lower mortgage interest rates will boost the mortgage market, expecting moderate growth in 2019.
Overall, Freddie Mac’s February forecast anticipated US GDP growth to slow down to 2.5% in 2019 and 1.8% in 2020 as the economy settles into long-term potential growth of under 2% per year.
The US labor market remained strong despite uncertainty in other areas of the economy, according to the forecast. Unemployment will drop slightly to 3.6% in 2019 before returning to a more sustainable long-term rate of 3.9% next year.
Similarly to 2018, the 30-year fixed-rate mortgage rate will likely average 4.6% this year before rising to 4.9% in 2020. Total housing starts, on the other hand, were expected to increase to 1.29 million units in 2019 and further to 1.36 million units in 2020, well below long-run demand.
Total home sales will slowly regain momentum due to lower mortgage, growing to 6.10 million in 2019 and to 6.12 million in 2020, Freddie Mac predicted.
“We expect single-family mortgage originations to increase 2.6 percent to $1.69 trillion in 2019 and remain around that level in 2020,” said Freddie Mac chief economist Sam Khater. “With mortgage rates easing up since the end of 2018, we revised up our forecast of the refinance share of originations to 27% and 24% in 2019 and 2020, respectively.”
The growth rate of the Freddie Mac Price Index went down slightly to 0.7% in the fourth quarter. Home prices will increase 4.1% and 2.8% in 2019 and 2020, Freddie predicted.