Freddie Mac Housing Outlook for May 2018

Below are some highlights from Freddie Mac’s May housing report

  • Gross Domestic Product (GDP) grew at an annualized rate of 2.3 percent in the first quarter of 2018, down from 2.9 percent in the fourth quarter of 2017
  • Consumer spending growth lowest in 5 years
  • Economy added jobs for 91 consecutive months
  • 3.9% unemployment rate
  • Hourly earnings increased 2.6% year over year
  • Inflation increase is 2.5%

Mortgage Rates

  • Inflation will put upward pressure on interest rates and mortgage rates
  • 30 year fixed continued to increase in May, 4.66% by mid month, continued increase expected
  • Expected rates of Q4 2018 4.9% and 5.4% in 2019

Housing Demand

  • Increasing interest rates have not yet had an adverse affect on demand, good sign reflecting a healthy economy and strong consumer confidence
  • Home sales forecasted to increase to 6.32M, an increase if 3% year over year and 6.44M in 2019, 2% year over year increase

Mortgage Originations

  • Affordability decreasing with higher borrowing costs
  • Signs of strong labor market and pent-up buyer interest shows confidence in demand
  • Refinance activity declined $300 billion (32%) from 2016 to 2017, forecasted to decline another $175B (26%)
  • High home sales and house prices will increase purchase origination loans by $60B
  • Originations expected to decrease 6% in 2018 to $1.75 trillion and $1.74 trillion in 2019


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