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Housing Market is Expected to Stabilize in 2019

Read Time: 3 Minutes December 24, 2018

Overhead view of neighborhood in Autumn

Economic growth is expected to slow in 2019 leading to stabilized home sales and mortgage rates, according to Fannie Mae‘s economic and strategic research group.  A widening trade deficit and moderation of business investment growth have Fannie Mae’s team predicting that full-year gross domestic product growth (GDP) will slow to a 2.3 percent increase — down from this year’s projected 3.1 percent increase.

Consumer spending will continue to be the largest driver of growth, but in the third quarter of 2018 business investment growth slowed significantly. It could be even further impacted by higher tariffs, uncertainty around trade deals and rising interest rates.

“We expect full-year 2018 economic growth to come in at 3.1 percent — an expansion high — before slowing markedly to 2.3 percent in 2019 and 1.6 percent in 2020,” Doug Duncan, Fannie Mae’s chief economist said in a statement. “Fading fiscal policy, worsening net exports, and moderating business investment all contribute to our projection that GDP growth will begin to slow in 2019.”

Purchase mortgage originations are expected to climb in 2019, but a substantial decline in refinanced mortgages is expected, which should overall result in a small drop in total origination volume, the research team said. Stabilizing mortgage rates — along with expected strong job growth — should give more prospective homeowners a chance to adjust to the new rates, the report states.

“If mortgage rates trend sideways next year, as we anticipate, and home price appreciation continues to moderate, improving affordability should breathe some life into the housing market,” Duncan said.

Source: Patrick Kearns


Mortgage Rates Continue to Slide

Mortgage rates continued their retreat, helped by volatility in the financial markets and weakened inflation expectations.

“Big losses in stock markets and softened inflation expectations due to rapidly falling oil prices combined to push rates lower,” said Aaron Terrazas, senior economist at Zillow. 

“Unexpectedly strong existing home sales data provided a welcome salve for a housing market that has been a sore spot for the overall economy in 2018, at least temporarily delaying fears that a softening housing market could herald looming weakness. The week between Christmas and New Year’s is historically very quiet in financial markets, and volatility can be magnified by low trading volumes. We don’t expect meaningful rate movement over the holidays, but the outlook for 2019 suggests, if nothing else, an increasingly uncertain path.”

The Federal Reserve raised its benchmark rate again, the fourth increase this year. The Fed doesn’t set mortgage rates, but its decisions influence them. found that almost all of the experts it surveyed say rates will go down in the coming week. Greg McBride, chief financial analyst at, is one who predicts rates will fall.

“The Fed has indicated they’ll be less aggressive with rate hikes in 2019 and will be monitoring the global economy and financial markets for any impact on the outlook,” McBride said. “Plus, they moved their inflation expectations a notch lower. This is all good news for mortgage rates.”

Meanwhile, economic uncertainty is causing borrowers to stay on the sidelines. Mortgage applications were down, according to the latest data from the Mortgage Bankers Association. The market composite index — a measure of total loan application volume — decreased 5.8 percent from a week earlier. The refinance index fell 2 percent from the previous week, while the purchase index dropped 7 percent.

The refinance share of mortgage activity accounted for 43.5 percent of all applications.

“Fewer borrowers [were] looking to refinance their mortgage or purchase a home,” said Bob Broeksmit, MBA president and CEO. “Purchase applications led the decline …, but the year-over-year trend was more favorable, with activity up 2 percent. Lack of affordable inventory, this year’s higher rates and prices, and stock market volatility are all weighing on prospective buyers’ psyches at the end of 2018.”

Source: Kathy Orton

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