An October 18th news release by Fannie Mae predicts a slowing housing market as the economic outlook remains steady for 2019.
Economy Grows, Housing Market Falters
In October, Fannie Mae’s Economic and Strategic Research Group (ESR Group) reaffirmed their expectation that GDP growth will be at 3.0% in the full year of 2018 and will grow by 2.3% in 2019, despite robust second quart growth numbers in 2018.
However, Fannie Mae has reduced expectations for the housing market for full-year 2018 and 2019. Home sales are predicted to decrease, a reversal from previous years. Currently, the housing market is experiencing a slight downturn, due to financial uncertainty internationally, changes to the Fed interest rates in the U.S., deteriorating affordability, and declining housing sentiments.
Home Sales Decreasing
One of the driving factors for the reduction in predicted home sales is the affordability of homes in the United States. Affordability has steadily been eroding, creating a challenge for homebuyers, especially those seeking to buy their first home. Investors, however, have not been as adversely affected by deteriorating affordability as retail homebuyers.
According to recent Fannie Mae home sentiment index data, people are losing confidence in the housing market. Fewer people believe it’s a good time to buy a home, leading more people to continue renting rather than making a home purchase. People also believe it’s an increasingly bad time to sell a home, leading to tighter market conditions.
The overall housing market in the U.S. has been fluctuating as more people change their minds about making a home purchase. In general, lower-priced home markets are tightening more than higher-priced home markets.
Mortgage Interest Rate Increases for 2019
As the Fed prepares to increase interest rates in 2019 and early 2020, mortgage rates are likely to see upward adjustments according to data compiled by the Home Buying Institute. Predictions by Fannie Mae, Freddie Mac, and the National Association of Home Builders (NAHB) all show some increase is likely, though the increases are expected to be moderate.
Though gradual mortgage rate increases are expected throughout 2019, there are moderate disagreements, with Fannie Mae and the NAHB both expecting very slight changes while Freddie Mac sees the possibility for year-long gradual increases.
- Fannie Mae and the NAHB predict interest rates to be between 4.6% – 4.71% over the course of 2019 for a 30-year fixed rate mortgage.
- Freddie Mac predicts interest rates to increase to around 5.0% in early 2019 for a 30-year fixed rate mortgage, with slight increases throughout the rest of the year.
In July of 2018, the average mortgage rate was at 4.53%. Increases predicted by Fannie Mae and the NAHB would not have an enormous impact on the market, as they are only slightly higher than current mortgage rates around the country. However, if Freddie Mac’s prediction of a slow rise to 5.1% is more accurate, there could be a greater impact on home sales throughout the U.S., as issues surrounding affordability further impact the housing market.
Home Values Increasing
Besides affordability and mortgage rates, increasing home values are predicted to also negatively impact home sales.
Home values are expected to increase by 6.6% in 2019, following the 8.3% increase in 2018. The median home value in the United States was $217,300 in August of 2018.
Rising home values coupled with expectations of higher mortgage rates in 2019 could be the leading factor causing home sales to decline.
Getting a Mortgage in 2019
In tight and turbulent housing markets, it’s more important than ever to use a highly experienced mortgage broker who can help you navigate buying a home or refinancing a home loan with the best mortgage and lowest possible interest rate.
Marimark Mortgage, led by Mary Catchur, former COO and CFO of New Homes Realty, has experience with home mortgages in up and down housing markets.
The team at Marimark Mortgage provides mortgages to homeowners, homebuyers, and investors in Florida, Virginia, and Pennsylvania. The company can uniquely serve clients with their mortgage needs because of Ms. Catchur’s diverse qualifications in mortgages, real estate, and finance. Many times, Marimark Mortgage finds solutions for clients when other mortgage professionals fail.