In total, Fannie Mae forecasts economic growth to surge from an anticipated 2.8 percent to 3.0 percent for the year, but we’re going to look more specifically at the housing numbers.
First, let’s get a sound bite from Fannie Mae Chief Economist Doug Duncan:
“Housing continues to drag on growth due to lackluster homebuilding activity, home sales, and brokers’ commissions,” says Duncan. “Its overall weakness likely reflects continuing inventory shortages, rather than a decline in demand.”
So, what does Fannie Mae’s Housing Forecast updated for 2018 reveal about the real estate market?
Total Existing Home Sales (single-family, condos, etc.)
2018 5,465
2017’s numbers 5,511
Estimated for 2019 5,547
Analysis:
That represents an estimated decrease of -0.8% in total existing home sales from 2017 through 2018. That’s a continued decline from the -1.8% from 2017-2018.
However, in a significant shift, Fannie Mae’s estimates total existing home sales numbers for 2019 to increase 1.5%. That’s great and unexpected news!
What about home sales just for new single-family homes?
2018 653
2017’s numbers 613
Estimated for 2019 682
Analysis:
We’ve seen huge momentum in new home starts and new construction over the last couple of years, which is much needed considering inventory levels. In 2018, Fannie Mae expects a 6.5% increase in new homes sales (volume). That adds to the huge increase of 9.3% from 2017-2018.
Fannie Mae does expect a slight slowdown in single-family new home sales in 2019, but still with a healthy 4.4% anticipated increase.
If we add up the new home sales and existing home sales figures, we come up with:
Total home sale (new + existing):
2018 6,118
2017’s numbers 6,124
Estimated for 2019 6,229
Analysis:
2018 has basically flatlined for total home sales with a net -0.1% (a tenth of 1%) decline, comprised of strong new home sales numbers and lagging existing home sales volume.
The good news is that Fannie Mae does predict a 1.8% increase in home sales in 2019.
Total Housing Starts
2018 1,279
2017’s numbers 1,203
Estimated for 2019 1,306
Single-Family Housing Starts Only
2018 906
2017’s numbers 849
Estimated for 2019 965
Analysis:
That represents a 6.7% increase in single-family housing starts since 2017, which is encouraging, but still a slowdown from the 8.6% increase we saw from 2017 to 2018.
Fannie Mae predicts that in 2019, we’ll have an additional 6.5% more single-family housing starts than this year.
How about home prices?
Median new home prices:
2018 $334,000
2017’s numbers $323,000
Estimated for 2019 $349,000
Median existing home prices:
2018 $260,000
2017’s numbers $247,000
Estimated for 2019 $272,000
Analysis:
From 2017 to 2018, median home prices went up a healthy 6.8%. Fannie Mae predicts that they’ll continue to rise through the end of 2018, with a 5.3% year-end increase.
In 2019, Fannie Mae expects a slightly lower increase, but it’s still a very solid 4.1% median home price increase. That’s great news for homeowners across the country!
What other news can we glean from Chief Economist Duncan? We could be in for another Fed rate bump in 2018 – and more to follow in 2019.
“While meaningful wage growth remains elusive, the labor market is strong, and inflation appears to be gaining additional steam, making a Fed rate hike in September highly likely,” reports Duncan. “Assuming consumer and business confidence can steer clear of escalating trade tensions, we expect the Fed to raise rates two more times in 2018, including next month.”
Final analysis:
Tight housing inventory is driving demand, but as prices climb and the curve of mortgage interest rates rises from one of the lowest valleys we’ve seen in history, affordability for homeowners – especially first-time homeowners – is of particular concern.
In 2018 and beyond, taking advantage of financing options like FHA loans, VA loans, and capitalizing on low-interest rates with conventional loan programs are paramount for buyers who want to capitalize on a still-hot housing market.