According to Fannie Mae’s Economic & Strategic Research (ESR) Group, domestic growth is expected to be stronger in 2019 than previously predicted thanks to consumer spending, a strong labor market, and a recent rebound in equity valuation. This is helping to offset growing weakness in business investment and government expenditures. The housing forecast is following a positive track, but not without continued inventory and affordability concerns.
Housing continues to benefit from the lower mortgage rate environment, according to the ESR Group. A surge in refinance activity (up three percent from 2018) and moderate house price growth has led to an expected improved total origination volume of seven percent in 2019. Both new and existing home sales are expected to pick up through the rest of the year as inventory improves. Homebuyer sentiment has also improved, with the Home Purchase Sentiment Index® re-approaching its survey high.
“As the current U.S. expansion celebrates its tenth anniversary, it does so under an economic backdrop of growing domestic and global uncertainty – and slowing growth,” said Fannie Mae Senior Vice President and Chief Economist Doug Duncan. “The heightened uncertainty, stemming in part from the seemingly intractable trade dispute between the U.S. and China, appears to have reduced business’ investment incentive…”
Housing Forecast: Hopes Remain High
“Housing remains a net positive to the economy, as the industry anticipates growth fueled by strong household balance sheets, low mortgage rates, and a surge in refinance activity,” Duncan continued. “However, the housing industry still doesn’t have an answer for the related problems of low supply and affordability. While home price appreciation has largely moderated – particularly compared to the recent past – and demand for modestly priced homes has proven strong and resilient, the lack of affordable inventory continues to cap sales and limit the potential pool of would-be homeowners.”
Visit the Economic & Strategic Research site at www.fanniemae.com to read the full July 2019 Economic Outlook.