Mortgage rates have been below 4% for most of 2019. However, LendingTree predicts that rates could increase nearly 50 basis points in 2020, creeping above 4%.
Decreases of 100-basis points since November 2018 have boosted affordability. LendingTree adds that a trade war and slower global growth could push rates lower, but growth concerns or a possible recession could drive rates further.
Freddie Mac’s latest Primary Mortgage Market Survey reported the average 30-year fixed-rate mortgage was 3.73%—unchanged from the prior week.
“The economy continued to pick up momentum with a solid increase in residential construction, improvement in industrial output in our nation’s factories and a rise in job openings,” said Sam Khater, Freddie Mac’s Chief Economist. “While the economy is in a sweet spot, improvements in housing market sales volumes will be modest heading into next year simply due to the lack of available inventory.”
The average 30-year fixed-rate mortgage this time last year was 4.62%.
Another prediction by LendingTree was that flat to slightly higher rates will support sales, and to expect sales to grow “modestly” by 2% and 5%.
Existing home sales fell 1.7% from October in November to a rate of 5.35 million. Sales are still up by 2.7% when compared to November 2018, according to the National Association of Realtors.
Lawrence Yun, NAR’s Chief Economist, said the decline in sales for the month is not worrisome.
“Sales will be choppy when inventory levels are low, but the economy is otherwise performing very well with more than 2 million job gains in the past year,” Yun said.
The median existing-home price for all housing types in November rose 5% to $271,300. November marks 93 straight months of year-over-year gains.
While supply has been another main issue for the housing market, LendingTree predicts housing starts should increase in 2020, “continuing momentum” from late 2019 that is supported by lower rates.
“Still, an increase of about 5% in starts will do little to alleviate the supply crunch,” the report said.