Photo: Robert Clark
New homes could be the main driver of overall sales in the US housing market next year, according to a report released yesterday by Freddie Mac.
Housing starts are expected to increase from 1.22 million this year to 1.33 million in 2018. This flurry of activity should make new homes the primary driving force next year, says the government backed company that provides capital to mortgage lenders in its September 2017 Outlook.
Over the next year, Freddie Mac is predicting home sales, including new and existing homes, to rise about 2 percent.
Price growth is expected to slow to a rate of 4.9 percent in 2018, down from 6.3 percent in 2017 (January through August, the most recent data available) primarily due to moderate mortgage rate increases and the slow increase in housing starts.
So far this year, homeowners have been able to increase their home equity thanks to rising prices. In the second quarter of this year, the dollar value of equity “cashed out” was $15 billion, up $1.2 billion from the previous quarter.
“As home prices keep rising, cash out activity is likely to also rise,” says Freddie Mac in the report.
Homeowners may elect to do cash out refinance loans so they can turn some of their accrued equity into cash by refinancing their current loan at a higher amount and taking the difference between the two loans in cash.
“The economic environment remains favorable for housing and mortgage markets. For several years, we have had moderate economic growth of about two percent a year, solid job gains and low mortgage interest rates. We forecast those conditions to persist into next year,” says Sean Becketti, chief economist at Freddie Mac, in the report.
Click here to read the entire report.