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Pandemic Causes Drop in Home Sales

According to Freddie Mac’s Quarterly Forecast, housing markets have been affected by the pandemic with both home sales and house price growth declining.

“While the housing market undoubtedly has felt the effects of COVID-19, we are encouraged by recent homebuyer demand as well as mortgage rates that should remain at record lows for the foreseeable future.” said Sam Khater, Freddie Mac’s Chief Economist. “However, beyond the initial rebound in the housing market, the economic and housing outlook will be heavily impacted by the prospects for a vaccine, fiscal policy and the underlying organic recovery of the economy which, in combination, make the outlook highly uncertain.”

According to the Forecast, the average 30-year fixed-rate mortgage is expected to be 3.4% in 2020 and 3.2 percent in 2021. House price growth is expected to decelerate to an annual rate of 2.3% in 2020. In 2021, that rate is expected to be 0.4%. Home sales are expected to decrease in 2020 to 4.8 million homes and increase in 2021 to 5.6 million homes. Purchase originations are expected to decrease to $1.044 trillion in 2020 and increase to $1.244 trillion in 2021. Refinance originations are expected to be $1.872 trillion in 2020 before falling to $1.279 trillion in 2021.

Overall, the Forecast expects annual mortgage origination levels to be $2.916 trillion in 2020 and $2.524 trillion 2021.

After falling off the cliff last month, the latest report on housing starts, permits, and completions by the U.S. Census Bureau was a mixed bag.

Housing permits in May rose 14.4% in May from April but were 8.8% below the mark set in May 2019. Housing starts also rose monthly growing by 4.3% in May. Housing starts, though, are 23.2% below last year’s numbers.

The Bureau reported that housing completions were down 7.3% in May when compared to April and 9.3% below the May 2019 rate.

Odeta Kushi, Deputy Chief Economist, First American Financial, said May’s spike in homebuilder sentiment “smashed expectations” and, coupled with low mortgage rates, are further evidence of recovery for the housing market.

“Today’s month-over-month increase in housing starts indicates a turn may be on the way. Housing permits, a leading indicator of future starts, are up 14%, and 12% for much-needed single-family homes. This bodes well for further increases in starts in the coming months,” she said.

About Author: Seth Welborn

Seth Welborn is a Harding University graduate with a degree in English and a minor in writing. He is a contributing writer for MReport. An East Texas Native, he has studied abroad in Athens, Greece and works part-time as a photographer.

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