Mortgage giant Freddie Macsees a slowing down of mortgage activity in the coming year, thanks to the recent hike in mortgage interest rates, in its recently published monthly Outlook.
Potential administrative efforts by the president-elect in 2017 are seen to bring forth some real economic growth, but the current mortgage rate situation could offset that growth.
Freddie Mac’s Chief Economist Sean Becketti says the new normal may dampen demand on homes, thereby weakening home sales. The driving down of affordability could also slow down construction growth. That, on top of the already scarce available housing inventory. According to Becketti, refinancesare likely to see a possibly 50 percent cut from last year’s origination numbers.
This interest rate increase is projected to slow down the pace of housing construction by over a million, and cut down home sales by 220,000 units.
Will we see a bleak economy in 2017?
Despite the negative forecast on market response to hiking mortgage rates, economic growth is still seen as a positive, with an expected 1.9 percent year-over-year growth in the year 2017. Unemployment, on the other hand, is expected to be at 4.7 percent, owing to the current full employment.
One thing is for certain: the rate hike in December. There are ample speculations as to how the rates would fare in the incoming year, but the 4 percent new normal is expected to sustain its position until the end of the year.
The number of available homes, coupled with higher mortgage rates, could drive up home prices. Freddie Mac predicts housing affordability will continue to decrease, with its increasing pace seen to reach 4.7 percent in 2017.
If you are a homeowner planning to refinance, or a potential borrower looking to purchase a new home, now could be a great time to lock, before the expected hike in December settles in.
Contact a reliable lenderto guide you through the process of home purchasing or refinancing.