Freddie Mac has revised downward its economic forecast for the remainder of 2016 following a tepid first quarter, but still remains upbeat about the housing market.
Lower-than-expected figures for consumer spending, manufacturing, trade, and auto and retail sales led the government-sponsored enterprise to lower its forecast for real GDP growth to 1.1% for the first quarter, from the previously estimated 1.8%. For the full year, Freddie Mac expects 2% growth in GDP.
Similarly, Freddie Mac expects that the job market's remaining slack, fueled in part by increases to the labor force participation rate caused by long-unemployed individuals' return to the workforce, will continue to depress wage growth. The
Despite these relatively bleak projections, Freddie Mac showed no signs that it will let go of its positive outlook on housing anytime soon.
Declining Treasury yields have led to similar drops in the national average for a 30-year fixed-rate mortgage. As of April 14, the average rate was 3.58%, the lowest it has been since May 2013. Since the beginning of the year, the 10-year Treasury and 30-year fixed-rate mortgage have fallen 44 and 40 basis points, respectively.
And lower rates and improved job growth together have supported rising home sales, while low inventory continues to present a challenge. Housing starts are expected to increase by roughly 200,000 each year for the next two years, the GSE said, which should help alleviate the pressure on inventory.
Rising home sales are expected to cause an increase in mortgage debt outstanding of 3.5% in 2016 and 4% in 2017. Lower rates are also forecast to lift refinancing activity. Freddie Mac revised upward its estimate for one- to four-family mortgage originations by $50 billion to $1.7 trillion.
