Recap of 2017; Outlook 2018, 2019; Best Growth in a Decade. Will it Hold?
Recap of 2017: The Best Year in a Decade (Excerpt from Freddie Mac)
Economic conditions remained favorable for housing and mortgage markets in 2017. Despite challenges, the housing markets remain on track for their best year in a decade by a variety of measures.
Solid job gains and low interest rates provide favorable economic conditions for housing and mortgage markets.
What’s ahead in 2018 and 2019?
It’s unlikely the economic environment will be much more favorable for housing and mortgage markets in 2018 and 2019. We forecast that interest rates will remain low by historical standards, but gradually creep higher over the next two years. We also forecast that housing construction will gradually pick up, helping to supply more homes to inventory-starved markets. More housing supply and modestly higher rates will lead to a moderation in house price growth.
Home prices accelerate
Strong demand, low mortgage rates and a lack of for-sale inventory have contributed to accelerating house prices. Nationally, home prices increased at a 6.4 percent annualized rate over the quarter ending September 2017 (Exhibit 11). Home price growth in some markets exceeds 10 percent a year, with Washington (12.8%) and Nevada (11.3%) leading the way in 12-month percent growth in house prices (Exhibit 12). For an in-depth analysis of the factors driving house prices and whether recent rates of home price appreciation are sustainable, see our Insight “The ‘B’ Word: Can we spot the next house price bubble?”
Stay tuned… We’ll look at the ‘B’ Word next week. The devil is in the details.
A lack of inventory is helping to contribute to an acceleration in home prices.
Modest economic growth, robust job gains, and low interest rates make for a favorable economic environment for housing and mortgage markets. But despite the favorable environment, housing markets have stalled a bit through summer and into fall.
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