Get free access to our world class MLS search tools, save your favorite listings, create saved searches & much more!

Freddie Says Housing Will Help to Stop Recession, Here's How

Posted by Julie Wright on Tuesday, September 10th, 2019 at 1:31pm.

Housing led the way into the last recession, now Freddie Mac's economists are suggesting it might help stave off the next one or at least modify its severity.  In its August Forecast, the company says a deteriorating global economy and on-going US trade disputes with multiple countries has led to a drop in long-term interest rates to a three-year low and has "poised housing to reaccelerate."

The report says to expect a significant increase in refinance originations and the combination of low rates, a tight labor market and strong consumer confidence to offset declining business sentiment. "These factors will set the stage for continued improvement in the housing market heading into the fall."

But economic growth will slow. With the effects of tax cuts and fiscal stimulus that stoked growth in 2018 fading, Fannie Mae expects growth of 2.2 percent this year, decelerating to 1.8 percent in 2020. Consumer price inflation will remain at 2.4 and 2.3 percent in the last two quarters of the year and will edge down to 2.0 percent in 2020.  The labor market will remain strong with an unemployment rate of 3.7 percent for the rest of the year, increasing to 3.8 percent next year.

The U.S. is not alone when it comes to low-interest rates. Long-term government bond yields have fallen with increased global uncertainty and are below zero in many European countries. In Denmark, for example, its 30-year fixed-rate mortgage (FRM) has fallen as low at 0.5 percent, demonstrating the enormous downward pressure on long-term rates everywhere.

Thus, Freddie's economists have revised their forecasts for the 30-year FRM.  They expect the current rate to remain at 3.6 percent through the second quarter of next year and have reduced their average annual projections for the second time in 30 days.  Their late July revision to 4.1 percent this year and 4.0 percent in 2020 is now at 3.9 percent and 3.7 percent respectively.

They have revised other rate estimates downward as well. With the expectation of further Fed rate cuts in the last half of this year and again in 2020, they predict an effective Federal Funds rate of 2.1 percent in the third and fourth quarters and an annual rate of 2.3 percent for 2019 and 2.0 percent in 2020. The 10-year Treasury yield will be down to 2.2 percent on average this year as foreign investors move to the American bond market and to decline to 1.8 percent next year. Maintaining a spread between yields, the 1-year Treasury rate will be 2.1 percent this year dropping to 1.7 percent in 2020.

The economists expect housing starts to recover from their 2018 slump. Builder confidence should support 1.25 million housing starts this year and 1.28 million next year. Current mortgage rates along with increased demand and a projected uptick in housing supply have brought optimism that sales will recover in the second half of 2019 and reach 5.94 million this year than almost recover to 2017 levels in 2020, at 6.04 million. 

The forecast says the strong data over the last few months provides guidance for house prices to continue to beat expectations in the coming months. They should appreciate 3.4 percent this year and then taper off to 2.6 percent next year.

With lower mortgage rates, refinancing should increase significantly from what Freddie Mac forecast in July. The Mortgage Bankers Association's Refinance Index has increased by 50 percent in the last month and Freddie Mac says this reinforces its belief in the strength of the refinance market. They expect that share of originations to grow to 43 percent in 2019 and 33 percent in 2020.  As purchase originations have recently seen a rate-driven increase they also expect those to be higher, with a total mortgage volume of $2 trillion this year and $1.8 trillion in 2020.

Mastura Roberts
(702) 919-5400
offers@greatlasvegashomes.com

Team Leader, The Tonnesen Team
Berkshire Hathaway HomeServices, Nevada
3185 St Rose Pkwy #100 Henderson, NV 89052

With over 30 years of experience helping families call Las Vegas "home!"



Related Blog Posts

Help for Some Las Vegas Homeowners May Be On the Way!

While exact details have not yet been announced, it seems that help for some Las Vegas homeowners may be on the way as early as November 15th. Homeowners that have a mortgage loan guaranteed by either Freddie Mac or Fannie Mae may be able to refinance soon, even though they are underwater.The Las Vegas real estate mark...

Buying Vs Renting 38% Cheaper in Today's Market

The latest statistics are in: with interest rates hovering around 4.5% for a 30-year fixed rate mortgage, buying is 38% cheaper than renting as a national average, down from being 44% cheaper one year ago. For example, if your rent is currently $1200 per month and you purchase a $175k home with a 3.5% down payment at a...

The Pros And Cons Of A Reverse Mortgage

We’ve all seen the ads on TV. Our favorite celebrities from the 70s and 80s telling us how reverse mortgages are a great way to add to retirement and eliminate monthly mortgage payments. And for some people, they can be an attractive option to consider depending upon your own personal situation. But they definite...

December: The Black Friday of Real Estate

Savvy buyers know: the month of the December is THE very best time of the year to pick up deals on real estate in Las Vegas! Most markets across the United States have a much longer "slow" season for real estate purchases. In the southern sunbelt, which is traditionally snowbird country, the summer months are the best...

Smart Homes — What Buyers And Sellers Need To Know

Smart home technology is growing rapidly—it’s expected to be a $130 billion industry by 2020. Predictably, millennials are leading the smart home charge, but all demographics are enjoying the powerful features these devices can offer. What exactly is a smart home device? These are connect...

Leave a Comment

Have a Question?

Contact Us

Follow Us