It’s too soon to know if the current negative trends, such as limited housing supply and the effect of higher rates, which have defined the mortgage market in 2018 will continue into next year. On the other hand, it is possible that the market will adjust and resume modest growth, according to the November Forecast from Freddie Mac.

“Almost all the trends in the U.S. housing market have been negative in recent months as housing market activity continues to adjust to higher mortgage rates,” said Sam Khater, chief economist for Freddie. “If new home sales are to resume growth in 2019, builders might have to shift their focus to more modestly priced homes and smaller sized homes to help offset housing affordability concerns. But with cost pressures pinching profitability, this will be a significant challenge.”

Several highlights from the Forecast are as follows:

• Expect GDP growth to average 3 percent in 2018 before slowing to 2.4 percent in 2019 and 1.8 percent in 2020.
• Expect total home sales to decrease 1.6 percent to 6.02 million in 2018 before slowly regaining momentum and increasing 1 percent to 6.08 million in 2019 and 2 percent to 6.20 million in 2020.
• Expect home prices to increase 5.1 percent in 2018 with the rate of growth moderating to 4.3 percent in 2019 and 2.9 percent in 2020.
• Expect single-family mortgage originations to decline 9.9 percent year-over-year to $1.63 trillion in 2018, falling slightly to $1.62 trillion in 2019 and dropping e to $1.60 trillion in 2020. The performance is the result of shrinking refinance activity.
• Adjusted for inflation in 2017 dollars, an estimated $14.2 billion in net home equity was cashed out during the refinance of conventional prime-credit home mortgages in the third quarter of 2018, down from $18.3 billion a year earlier and substantially less than the peak cash-out refinance volume of $102 billion during the second quarter of 2006.