【Freddie Mac】The Housing Market Continues to Stand Firm

Investors were increasingly optimistic of a possible trade deal between the United States and China in October which relieved some of the downward pressure on Treasury yields.

The first week of November saw the highest 10-year Treasury yields since July. However, the market has seen increased volatility in November as hopes for a favorable resolution to the trade dispute have recently waned. The second week of November saw the 10-year Treasury yield plummet by nearly 15 basis points.

The labor market stood firm in October as the unemployment rate remained near historical lows at 3.6%. Inflation remains subdued, with the consumer price index increasing just 1.8% year-over-year in October. With low interest rates, modest inflation and a solid labor market, the U.S. housing market continues to show strength. Our forecast is for the U.S. housing market to maintain momentum over the next two years.

We forecast that the average 30-year fixed-rate mortgage rate will be 3.8% in the fourth quarter of 2019 and 4.0% for full-year 2019. We expect rates to remain low, falling to a yearly average of 3.8% in 2020 and 2021. The housing market will continue to stand firm: home sales will rise in 2019 to 6.0 million before increasing to 6.1 million and then to 6.2 million in 2020 and 2021, respectively. House price growth will continue to decelerate through 2021 with annual rates of 3.2%, 2.9% and 2.1% in 2019, 2020 and 2021, respectively.

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