Even before the Federal Reserve announced its latest interest rate increase on December 19, Fannie Mae’s economic and strategic research group released its latest predictions about the 2019 housing market…a slower economy and more stability.
Apparently, the powers that be at Fannie Mae equate slower economic growth with more static interest rates and increasing affordability. Doug Duncan, the chief economist with Fannie Mae, said, “Fading fiscal policy, worsening net exports and moderating business investment all contribute to our projection that GDP growth will begin to slow in 2019.”
Fannie sees GDP going from 3.1% in 2018 to 2.3% in 2019 and to 1.6% in 2020. Fannie also sees consumer spending as the biggest driver of growth HOWEVER, prospective buyers have not been buying even as mortgage interest rates dropped to 4.6% in November and December. In fact, applications for home mortgage loans dropped 5.8% as the Fed announced its latest December 19 rate increase and the stock market dropped 350 points.
The Fed did indicate at its 12/19 announcement that it may slow the pace of interest rate increases in 2019. After five consecutive quarters of interest rate increases, potential homebuyers may feel relieved with the prospect of having only two or three interest rate increases in 2019.
Duncan said, “If mortgage rates trend sideways next year, as we anticipate, and home price appreciation continues to moderate, improving affordability should breathe some life into the housing market.”
All we know here is that the volume of mixed economic messages is loud. The job market continues to be strong and unemployment is at its lowest level in nearly 50 years. The stock market fell 8% prior to the Fed’s latest announcement and has erased 2018’s 380-point gain. Both auto and home sales have slumped as interest rates have climbed. And most experts anticipate continuing, if not worsening, trade tensions with China.
Does all of this sound like a stabile housing market in 2019 to you?
