Conditions in the country’s low-supply market could slightly improve by the end of the year according to Freddie Mac’s July Forecast released on Monday. The forecast projects new home construction will alleviate some of the current supply shortage, which in turn will increase sales 2.5 percent. That would bring the total to 6.27 million units, counting new and existing homes.
Meanwhile, Freddie also expects home prices to grow 6.7 percent.
“In most of the country, the healthy U.S. economy and robust labor market fueled considerable interest in buying a home during the busy spring buying season,” the report indicated.
At the same time, strengthening demand did not create a boost in sales activity. Listings, the report stated, were scant, while home price growth remained swift and higher mortgage rates squeezed the budget of many would-be buyers.
“Home sales have mostly moved sideways for much of the year, but given the sizable demand for buying in most markets, there’s hope for a small breakout in the months ahead,” said Sam Khater Freddie Mac's chief economist. “Mortgage rates have stabilized in recent months, and in some high-cost markets, price appreciation is showing some signs of easing. If new and existing housing supply can increase meaningfully, sales will follow.”
Elsewhere in the report, Freddie found July's mortgage rates had fallen off as an offshoot of declining long-term Treasury yields. The effect has been behind ongoing investor anxiety surrounding the potential of a long-term global trade war.
The 30-year fixed-rate mortgage is forecast to average 4.6 percent this year.
Total single-family first-lien mortgage originations are expected to slide around 7 percent this year to $1.69 trillion, driven by decreased refinance activity due to higher borrowing costs, the report indicated, while Freddie expects Gross Domestic Product growth to be 3.4 percent in the second quarter and 2.7 percent for the year.
In the meantime, Freddie reported, the U.S. labor market is robust, “which in turn is bringing more people into the workforce, increasing wages and spurring consumer spending and business investment.”