Fannie Mae is “pessimistic” about home sales in the future thanks to rising interest rates and affordability issues, though overall “steady” economic growth does offer something of a silver lining.
In a report released Thursday, Fannie Mae’s Economic and Strategic Research Group painted a picture of a somewhat gloomy near-term future, saying that it’s expectations for the coming year “have become more pessimistic.”
“Rising interest rates and declining housing sentiment from both consumers and lenders led us to lower our home sales forecast over the duration of 2018 and through 2019.”
Making matters even worse, the report states, is the fact that “affordability, especially for first-time homebuyers, remains atop the list of challenges facing the housing market.”
That conclusion alludes to skyrocketing housing prices in many major U.S. cities such as San Francisco, Los Angeles, and New York City, all of which have seen many would-be homebuyers priced out of the market.
Numbers released with Fannie Mae’s report show new housing starts holding mostly steady through the end of of 2019. Housing prices should also only see modest increases, growing from a median of $ 342,000 in the third quarter of 2018 to $ 368,000 in the fourth quarter of 2019.
Despite the sluggish housing news, Fannie Mae does expect economic growth to remain fairly consistent — welcome news for those who might have been bracing for a downturn or recession.
The report forecasts GDP growth of 3 percent in 2018 and 2.3 percent in 2019, citing consumer spending and trade as contributing to some economic slowing. Still, researchers described growth as “steady,” noted that the labor market has tightened, and said “inflation continues to hover just above the Fed’s 2 percent target.”
However, those conditions are “supportive of additional rate hikes in 2018 and 2019,” the report states.
Overall, the report remained relatively positive about the state of the economy generally, with Fannie Mae Chief Economist Doug Duncan writing that “economic growth likely clocked in at a solid pace last quarter.”