A Balanced Outlook for Housing in 2019

By Taff Weinstein at

A Balanced Outlook for Housing in 2019

Housing juggernaut, Fannie Mae says that unlike the past two years that were mostly a seller's market, 2019 is looking to be a more balanced market.

The housing market should see stability in 2019 as a moderation in higher home prices combined with continued strength in the labor market according to Fannie Mae.

"We expect full-year 2018 economic growth to come in at 3.1% – an expansion high – before slowing markedly to 2.3% in 2019 and 1.6% in 2020," said Fannie Mae Chief Economist Doug Duncan. "Fading fiscal policy, worsening net exports, and moderating business investment all contribute to our projection that GDP growth will begin to slow in 2019.

Duncan added that there could be some good news ahead for homebuyers, although first-time buyers could still face challenges.

“If mortgage rates trend sideways next year, as we anticipate, and home price appreciation continues to moderate, improving affordability should breathe some life into the housing market,” he said. “We also expect residential fixed investment to resume a positive growth trajectory amid continued rising housing starts and stabilizing home sales. However, affordability is likely to remain an industry concern, particularly among first-time homebuyers."

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 4.50 MBS) lost -19 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move slightly higher compared to the previous week.

Overview:  The long bond market was light on volatility as it was on "pause" ahead of the Federal Reserve meeting on December 19th as there is less certainty/consensus over what the Fed will do at that meeting.  Overall, our economic data was once again solid but concern over Brexit, France and Trade Wars kept money seeking safe-harbor in U.S. based bonds.

Retail Sales: The November data at first glance was just a little stronger than expected, but when you take into account the major upper revisions to October, the month-to-month comparison is actually quite good. The Headline monthly gain was 0.2% vs est of 0.1%. But October was revised upward from 0.8% to 1.1%. When you strip out Autos, the MOM gain was 0.2% vs est of 0.2% but October was revised upward from 0.7% to 1.0%. The Control Group really beat estimates with a 0.9% vs 0.4% expectation.

Inflation Nation: The November Consumer Price Index was exactly as expected with the Core (ex food and energy) YOY number hitting 2.2% vs est of 2.2%, and a slight increase from October's 2.1% level. When you look at the Headline PPI YOY, it matched expectations with a 2.2% reading which is much lower than October's 2.5% pace. The Atlanta Fed Business Inflation Expectations rose from 2.2% in November to 2.3% in December.

Jobs, Jobs, Jobs: The Job Openings and Labor Turnover Survey (JOLTS) once again showed over 1 million more jobs waiting to be filled then there are people that are unemployed in the U.S. During the financial crisis, our economy had 2 million job openings (still a lot)....now we have been trending at seven million (more than three times that amount)! This October reading is the second highest on record.

Trade War: China will drop tariffs on Autos for 3 months. Basically they are suspending their new 25% tariff that had increased from 15% to a 40% rate.

What to Watch Out For This Week:


The above are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages. I will be watching these reports closely for you and let you know if there are any big surprises.

It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets.  Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.

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