In its new ?Looking Ahead to 2018? report on the economy and housing, Freddie Mac predicts that the moderate economic growth that we?ve experienced this year, as well as job gains and low mortgage rates, will continue into next year.
If these conditions do continue as expected, Freddie Mac predicts three housing trends for the upcoming year. These include 1) purchase mortgage volume increases, 2) a reduction in rate refinance activity, and 3) more borrowers tapping into their home equity. Here are more details about these expected mortgage trends.
Growth in home sales is expected to be driven by new homes sales, not by the sale of existing homes. New construction of single-family homes is expected to rise by approximately 2% next year. Meanwhile, existing homes sales will continue to be stifled by limited inventory and an aging population with declining mobility that is staying put.
The report indicated there?s been a shift from a refinance-oriented market to a purchase-oriented market that will likely continue through 2018. In fact, it said that refinance loans will account for less than one-fourth of mortgage activity next year, the lowest this share of the market has been since 1990.
Slightly higher interest rates are one reason the market share will drop, as fewer homeowners are expected to refinance for the purpose of getting better rates.
More homeowners are expected to refinance or to take out second mortgages to pull cash out of their home equity. In fact, as long as home prices continue to rise, this activity should rise as well, Freddie Mac said. What will homeowners do with the cash? The report predicts they will invest in home improvements, consolidate existing debt, or pay student loans debt.
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