Freddie Mac released its monthly Outlook for March today, showing home values have risen 76%, while per capita disposable income has risen by 72% from the end of 2016.
As house prices climb, affordability may be a big factor in many markets around the nation as we head into the spring home buying season.
Other factors affecting affordability are a lack of housing inventory, home values outpacing incomes, and rising mortgage rates that are also putting a pinch on prospective home buyers.
These market problems will simply sideline many potential home buyers, which will result in a modest decline in total home sales from just over 6 million in 2016 to an estimated 5.9 million in 2017, according to Freddie Mac.
As a result of the decline, mortgage originations are projected to decline by approximately 25% for 2017. The drop is said to come almost entirely from plummeting refinances.
Homeowners who refinanced in 2016 in the form of cash-out refinances reached an aggregate $57.7 billion.
Sean Becketti, Chief Economist, Freddie Mac had released this statement along with the report:
“Recent indications of stronger growth convinced the Federal Reserve to raise the Federal funds rate this month and to signal further increases later this year. These Fed actions are unlikely to derail the moderate improvements in growth and employment, but rising interest rates will reduce mortgage originations and put a cap on house sales in 2017.
As we approach the spring home buying season, housing will be financially out of reach for many buyers because they will be competing in an environment of tight inventory, rising house prices and rising mortgage rates.
Additionally, based on our analysis of 2016 refinance activity, markets with the largest increase in house prices also experienced a high share of cash-out refinances. For example, in the Denver and Dallas metro areas the refinance cash-out share was above 50 percent for all borrowers who refinanced last year.”