A steadily growing Housing Market

Freddie Mac published its May forecast this week and in summary stated: “The combined positive impact of low mortgage rates, a strong labor market,low unemployment, and modest wage growth supports our forecast for a steadily growing housing market in 2019.”

Freddie Mac expects the 30-year fixed-rate mortgage (FRM) to average 4.3% in 2019, before increasing to 4.5% in 2020.

6 months ago the FRM was threatening 5% with plenty of forecasts that it would go even higher in 2019. Instead, the yield on the 10 year Treasury, off which the FRM is mostly priced, has dropped sharply, as a result of the combination of slowing world growth, the absence of indications of inflation reigniting, and the inevitable geo-political developments which send buyers rushing for the safety of Treasuries.

At the end of last year, when the stock market was in free fall, I wrote that the outlook for 2019 was for “a slowing, but still growing, economy and a stable housing market.” Since then, the stock market has recovered, the US economy has continued its modest (but possibly, therefore, sustainable growth) and mortgage rates have dropped back close to 4%.

In February 2002, Donald Rumsfeld, the then US Secretary of State for Defence, stated at a Defence Department briefing: “There are known knowns. There are things we know that we know. There are known unknowns. That is to say, there are things that we now know we don’t know. But there are also unknown unknowns. There are things we do not know we don’t know.”

Absent the arrival of any “unknown unknowns” the outlook for the rest of 2019 remains stable, both economically and in terms of real estate prices.

Andrew Oliver
Market Analyst | Team Harborside | teamharborside.com

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