A combination of strong job growth and low mortgage rates is helping to propel the housing industry towards one of its best years in decades, even as economic growth elsewhere in the country is weakening. That’s according to Freddie Mac’s latest Outlook report for May, which marks a change from the mortgage giants most recent predictions which stated that real estate wouldn’t perform as well as it did last year.
But Freddie Mac says March saw new home sales that were much better than expected. Meanwhile, existing home sales hit their highest level since 2007. As such, Freddie’s economists now believe we’ll see more than six million home sales in 2017.
“Despite weak economic growth, housing got off to a good start in 2017 because low mortgage rates have given the spring homebuying season a pleasant surprise,” said Sean Becketti, Freddie Mac’s chief economist. “Mortgage rates started March just above four percent and have mostly drifted lower since then, even falling below 4 percent. With home sales, housing starts, and home values up, 2017 is shaping up to be the best year for housing in over a decade.”
Also, unemployment in the U.S. is at 4.4 percent, the lowest rate since 2001.
Mortgage originations in the first quarter of this year totaled about $60 billion more than expected, mostly due to an uptick in refinances, according to Freddie. Mortgage originations in 2017 are expected to rise to more than $200 billion. In the first quarter of this year, 49 percent of refinance borrowers took cash out. That also marks the highest share since the fourth quarter of 2008 but remains far below the peak of 89 percent in the third quarter of 2006.
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