Housing market on track for best year in decade

But don’t look for conditions to be as favorable in the next couple of years

Housing market on track for best year in decade
Housing starts and home sales for 2017 remain on track for the best year in a decade in spite of disappointing performance in the latter half of the year, Freddie Mac said in its monthly outlook for November.

Freddie Mac said it expects housing starts to total 1.2 million and home sale to reach 6.13 million at the end of the year. The forecast comes despite the inventory shortage continuing through the summer and fall after a good start to the year. Freddie Mac also anticipates both figures to improve in 2018 and 2019 given the gradual pick up in housing construction.

The housing and mortgage markets have benefited from a favorable economic environment with modest economic growth, robust job gains, and low interest rates. However, markets have been challenged despite favorable conditions, with the shortage of for-sale homes playing a role in home-price acceleration, Freddie Mac said.

The constrained inventory was further complicated by strong demand and low mortgage rates, conditions which drove home prices across the US to increase at an annualized rate of 6.4% compared to the quarter ending September.

"It's unlikely the economic environment will be much more favorable for housing and mortgage markets in 2018 and 2019,” Freddie Mac Chief Economist Sean Becketti said. “We forecast that interest rates will remain low by historical standards, but gradually creep higher over the next two years. We also forecast that housing construction will gradually pick up, helping to supply more homes to inventory-starved markets. More housing supply and modestly higher rates will lead to a moderation in house price growth. Refinance activity will drop to very low levels and the mortgage market will be dominated by purchase activity."

Related stories:
Arch MI: Housing market to remain healthy through end of 2018
Fannie Mae maintains 2017 growth outlook on hurricane-related impacts