U.S. Home Sales Will Grow as Housing Supply Inventory Improves

housing supply

According to Freddie Mac’s July 2018 Housing Forecast, exceptionally low housing supply and weaker affordability slowed the housing market in the first half of 2018, but total sales activity should still slightly top year-ago levels.

In most of the country, the healthy U.S. economy and robust labor market fueled considerable interest in buying a home during the busy spring buying season. However, strengthening demand did not create a boost in sales activity because listings were scant. Also contributing was home price growth remaining swift and higher mortgage rates squeezing the budget of many would-be buyers.

Heading into late summer, Freddie Mac expects market conditions to slightly improve. Added new home construction helped to alleviate some of the current supply shortage. Also experts are forecasting total home sales (new and existing) for the year to increase 2.5 percent, and expecting home prices to grow 6.7 percent.

Home sales have mostly moved sideways for much of the year, but given the sizeable demand for buying in most markets. But there’s hope for a small breakout in the months ahead. 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 Forecast Highlights 

  • The U.S. labor market continues to be robust, which in turn is bringing more people into the workforce. This is increasing wages and spurring consumer spending and business investment. Experts are also forecasting Gross Domestic Product (GDP) growth to be 3.4 percent in the second quarter and 2.7 percent for the year.
  • Mortgage rates fell in recent weeks because of declining long-term Treasury yields. This continues to be pushed down by investor anxiety surrounding the potential of a long-term global trade war. The 30-year fixed-rate mortgage is forecast to average 4.6 percent this year.
  • Experts are expecting total (new and existing) home sales to increase 2.5 percent in 2018 to 6.27 million. Even with this year’s higher mortgage rates, experts are expecting home prices are to grow 6.7 percent.
  • Experts are expecting total single-family first-lien mortgage originations are to slide around 7 percent this year to $1.69 trillion. The decreasing refinance activity due to higher borrowing costs is the cause.

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