Freddie Mac economists are still upbeat with regards to the housing market’s outlook for the rest of the year, despite recent data that showed a gloomier first quarter in economic growth than originally projected. According to Freddie Mac’s April outlook, housing will “maintain its momentum in 2016 and be an economic engine of growth.” “We’ve revised down our predictions for economic growth to reflect the recent data for the first quarter, but our outlook for the balance of the year remains modestly optimistic for the economy,” says Sean Becketti, Freddie Mac’s chief economist. “However, we maintain our positive view on housing. In fact, the declines in long-term interest rates that accompanied much of the recent news should increase mortgage market activity, particularly refinance.”
Economists made these predictions for the remainder of 2016:
Employment: The labor market is expected to stay strong. The unemployment rate is projected to drop back below 5 percent for 2016 and 2017. “Stronger economic growth for the remainder of 2016 and reduced slack in the labor market will drive wage gains above inflation, though the gains are likely to be modest,” Freddie’s report notes.
Mortgage originations: Loan originations are estimated to rise by $50 billion in 2016 and reach $1.7 billion. The forecasted boost is because of low mortgage rates that are fueling a refinancing boom.
Mortgage rates: Low mortgage rates are predicted to remain around longer. The 30-year fixed-rate mortgage averaged 3.7 % in the first quarter. “After lowering the forecast for subsequent quarters by a tenth of a percent, expect rates to average 4 % in 2016,” Freddie Mac researchers note.
Housing prices: Home prices will rise by 4.8 in 2016 and also another 3.5 % in 2017, Freddie Mac researchers predict. These rising home prices will lead home owners’ to see more equity gains.
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