Freddie Mac’s latest housing outlook found tight home inventories, prices outpacing incomes, higher interest rates and declining affordability – all of which the agency said will affect home sales during the spring buying season.
The agency’s outlook for April found housing inventory, especially starter homes, at its lowest level in over ten years. It projects home sales decreasing in 2017. Freddie Mac attributes the low inventory to homeowners who are reluctant to sell because they fear they won’t be able to find another home within their budgets. Others do not want to give up the low mortgage rates they currently have.
“Tight housing inventory has been an important feature of the housing market at least since 2016. If inventory continues to remain tight, home sales will likely decline from their 2016 levels,” Freddie Mac Chief Economist Sean Becketti said. “As we enter the spring home buying season, all eyes are on housing inventory and whether or not it will meet the high demand.”
The outlook found home prices have not recovered to pre-crisis levels for many homeowners. Thus, selling their homes right now would produce less than the amounts they owe on their mortgage.
Also housing starts this year, projected to be 1.26 million, are below what the economy needs to add to replace existing stock, meet new household formation and second home demand.