By Varela Real Estate
A recent forecast from the economic research team at Freddie Mac predicts an increase in U.S. home sales during the summer of 2019. This positive outlook is largely based on low mortgage rates, low unemployment, and wage growth.
A Hot Housing Market for Summer 2019?
Earlier today, economists and analysts from Freddie Mac published an updated forecast for the nation’s housing market. Among other things, they expect to see an increase in home sales over the coming months due to low mortgage rates and other factors.
Freddie Mac’s chief economist Sam Khater said:
“Our outlook for the housing market remains largely unchanged. We still expect stronger home sales and housing starts in the coming months due to favorable market conditions and accelerating wage growth.”
According to Freddie Mac’s latest forecast, the U.S. housing market could heat up during the summer of 2019. They pointed to an increase in home sales, in particular.
“Expect total home sales to surpass 2018 levels and reach 5.98 million units in 2019,” the reports stated. “As was noted in last month’s forecast, most of the increase is expected to come from existing home sales.”
A separate report published today showed that the average rate for a 30-year fixed mortgage loan dropped to 4.07% during the week of May 16, 2019. During the firstweek of 2019, the average rate for a 30-year home loan was 4.51%. So they’ve come down quite a bit since then.
The team at Freddie Mac expect mortgage rates to remain below 4.5% (on average) through the summer of 2019 and beyond. They expect the average rate for a 30-year fixed home loan to average 4.3% this year, down from last year’s average of 4.5%.
So from an interest standpoint, summer 2019 could be a great time to buy a home.
Unemployment Down, Wages Up
The nation’s unemployment rate dropped to 3.6% in April 2019, according to the Bureau of Labor Statistics. A year ago, the jobless rate was 3.9%. The unemployment rate has been dropping steadily since 2009, when it peaked at 10%.
Wage growth among Americans has also risen. According to a May 2019 report from the U.S. Labor Department, average hourly earnings rose 3.2% in April compared to a year earlier. That marked three consecutive months during which wage growth topped 3%.
Job gains and wage growth are two of the factors singled out in this latest forecast, which predicts a warming housing market in summer 2019.
Will Trump’s Trade War Hurt the Housing Market?
But not all is rosy. Uncertainty surrounding Trump’s trade war with China could impact the housing market in the months ahead – and not in a good way.
Among other things, a prolonged trade war with China could send consumer confidence into a downward spiral. This in turn could reduce housing demand, at a time when the market is primed for growth.
Trade wars are notorious for increasing costs for consumers, and this one appears to be heading in that direction as well. It could also increase home-building costs, due to higher tariffs on building materials.
Rob Dietz, chief economist at the National Association of Home Builders, recently told MarketWatch:
“We estimate that the 25% rate on the existing set of tariffs represent a $2.5 billion annual tax increase for the housing sector in terms of materials used for construction. A trade war will also hurt sectors of the economy, like agriculture, and increase overall consumer wariness.”
Home Prices Slowing, as We Approach Summer
U.S. home prices, meanwhile, have slowed over the past year or so. According to the latest data from Zillow, the median home value in the U.S. rose by around 6% over the past year. But a recent forecast from the company predicts smaller price gains over the coming year.
“United States home values have gone up 6.1% over the past year and Zillow predicts they will rise 2.8% within the next year,” the company stated in May 2019.
But this relatively modest forecast isn’t necessarily a sign of weakness in the housing sector. It’s more like a market correction. House values in the U.S. rose unusually fast over the past few years, following the recession. So it’s only natural that they would begin to slow to a more historically “normal” rate of appreciation.