16
HOUSING
MARKET
TO REMAIN
BULLISH IN
2018
Tight inventory continued to boost
home prices as housing activity remained
upbeat towards the end of 2017, according to
the Economic and Housing outlook released
by Fannie Mae's Economic & Strategic
Research (ESR) Group.
e monthly forecast, which details interest
rate movements, the housing market, the
mortgage market, and the overall economic
climate, noted that total housing starts rose
in October to the highest level in a year,
even as new home sales approached a decade
high. ESR said that existing home sales posted
the first back-to-back gains this year, and
contract signings to close on existing homes
increased for the first time in four months, as
sales rebounded from hurricane disruptions.
"e housing market continues its upward
grind, as it struggles to balance strong demand
and house price appreciation with inventory
shortages and affordability concerns," Doug
Duncan, Chief Economist at Fannie Mae,
said.
As a percent of real estate value,
homeowner equity rose to 58.6 percent, only
1.2 percentage points below the most recent
peak at the end of 2005, ESR noted, adding
that the yield on 30-year fixed-rate mortgages
is expected to average 4 percent this year.
ESR said that while they had expected
shortages of skilled labor and land as factors
restraining building activity in their January
2017 forecast, the problem was more severe
than anticipated. Compared with the January
forecast, ESR overestimated mortgage
rates for 2017 by two-tenths. However, their
forecast for total home sales came very close
to the January prediction, as year-to-date
sales showed a 2 percent gain in 2017 over
2016, compared with a forecasted 2.2 percent
increase at the beginning of the year.
Considering 2018, ESR expects mortgage
rates to rise gradually, averaging 4.2 percent in
the fourth quarter of 2018 from 3.9 percent in
the current quarter. Total housing starts and
total home sales should rise about 5 percent
and 3 percent, respectively, in 2018.