Summary – Combined Fannie Mae-Freddie Mac-Mortgage Bankers Association Forecast
Existing Home Sales – -Change from Prior Year
+0.3 Percent 2019, Median Price Up 3.1 Percent
+1.7 Percent 2020, Median Price Up 3.1 Percent
New Home Sales – Change from Prior Year
+6.5 Percent 2019, Median Price Up 1.1 Percent
+0.4 Percent 2020, Median Price Up 3.2 Percent
Ted’s Existing Home Sales Forecast
-2.0 Percent 2019, Median Price Up 2.4 to 3.0 Percent
Existing home sales were down 4.2 percent in the first half of this year compared to 2018. The forecasts from Fannie Mae, Freddie Mac and the Mortgage Bankers Association, however, are more optimistic for the remainder of the year with expectations ranging from no change to a 0.6 percent gain. That would imply a nice recovery for sales in the second half of the year given the first-half shortfall.
Existing & New Home Sales
The following table shows expectations based on their July 2019 forecasts for existing home sales. In 2020 the current outlook is for a 1.7 percent gain in the number of existing home sales. New home sales are anticipated to rise by 6.5 percent in 2019 and then little changed in 2020 (up 0.4 percent).
Median Home Prices
Strong median home price increases seen in recent years are softening — with some local markets actually seeing price declines. Median prices for existing homes rose 4.0 percent from $252,230 in June 2018 (based on the 12-month average of the monthly median prices) to $262,410 in 2019. The current outlook is for median home prices to rise 3.1 percent in 2019 and again in 2020. New home prices are expected to increase a minimal 1.1 percent in 2019 and 3.2 percent in 2020. The slower price gain in new home prices in 2019 is due to the growing offering of entry-level new-home construction. In 2013 (when there was little if any new entry-level home construction) the typical new home cost almost 40 percent more than existing properties. Today that premium has shrunk to slightly less than 24 percent.
Seasonality has a material impact on prices, typically peaking in June and hitting the lowest levels of the year in January and February. See the Stewart Blog at http://blog.stewart.com/stewart/2018/12/11/tis-the-season-when-the-most-and-fewest-homes-sell-and-also-the-greatest-and-least-prices/ for a discussion on seasonality.
New home sales can be misleading as noted on the Stewart Blog at http://blog.stewart.com/stewart/2019/07/01/new-home-sales-may-2019-down-3-7-percent-vs-a-year-ago-or-maybe-not/
Despite the upside expectations for home sales from Fannie-Freddie-MBA in the remainder of 2019, my expectation remains to be down 2 percent in 2019 compared to 2018, with the median price rising from 2.4 to 3.0 percent.
The greatest challenge in housing today is the lack of affordability.