The growth of home sales slowed down this summer and is likely to remain that way for the rest of the year, according to Freddie Mac's [1] latest housing forecast [2]. The August forecast by the GSE revealed that while the U.S. economy grew at its fastest pace in four years in Q2 2018, the housing market played a limited role in this growth.
The report indicated that slower home sales growth, as well as decreased refinance activity due to higher mortgage rates, were likely to cause single-family first-lien mortgage loans to slide around 8 percent this year to $1.66 trillion.
"Limited inventory continues to affect home sales and prices," the report said. It noted that total home sales were likely to increase only "modestly" to 6.14 million. While prices were expected to moderate, they would still remain above inflation rates, the report stated.
The region most affected by the sluggish pace of home sales was the West, according to Sam Khater, Chief Economist at Freddie Mac.
“The housing market hit some speed bumps this summer, with many prospective homebuyers slowed by not enough moderately-priced homes for sale and higher home prices and mortgage rates,” Khater said. “These challenges were predominantly seen in expensive markets out West, where demand and sales are beginning to dampen because of weakening affordability.”
Along with sales, some of the other factors that affected the housing market during the summer included declines in new home construction as homebuilder challenges, limited inventory, and steady gains in prices created headwinds for the housing market.
Looking at the rest of the year, Freddie Mac said that it expects market conditions to remain the same mostly, with a slight rise in housing starts to ease the current inventory constraints.
“The good news is that the economy and labor market are very healthy right now, and mortgage rates, after surging earlier this year, have stabilized in recent months. These factors should continue to create solid buyer demand, and ultimately an uptick in sales, in most parts of the country in the months ahead.”