Economic environment remains favorable for the housing and mortgage markets
September 21, 2017
Freddie Mac released its September Economic & Housing Research Outlook this week revealing that the economic environment remains favorable for the housing and mortgage markets. For several years, Freddie says we have had moderate economic growth of about 2% a year, solid job gains and low mortgage interest rates. Freddie Mac sees those conditions persisting into next year. Freddie Mac sees a gradual increase in housing starts, moderate increases in mortgage rates that will help to reduce house price growth in 2018, and forecasts average U.S. house price growth of 4.9% next year.
In addition, the 30-year fixed mortgage rate is expected to average 4% in 2017 and 4.4% in 2018 while total mortgage originations will be $1.695T in 2018. Freddie Mac also sees the mortgage market shift away from refinance-dominated to a more purchase-oriented market. Freddie Mac forecasts that the refinance share of mortgage activity will decline to 25%, the lowest annual refinance share since 1990. In conclusion, for existing homeowners, rising home prices help increase their home equity. Homeowners looking for home improvement, to consolidate other debt or pay off student debt can cash-out home equity to do so.
And after two months of declines, mortgage rates edged higher in the latest week as Bond prices dropped pushing yields higher. Freddie Mac reports that the 30-year fixed mortgage rate rose 5bp this week to 3.83% with 0.5 added on top of the rate in points and fees. Last year this time the rate was 3.48%. The 15-year fixed rate mortgage was up 5bp to 3.13% this week, up from 2.76% last year.