While official existing home sales data, released this morning by the National Association of Realtors® (NAR), showed the sector's losing streak extending to three months and pending sales through May have lost ground for five straight months, Freddie Mac released an upbeat forecast for total home sales this year.  The company's economists said that both the exceptionally low inventory and rising home prices slowed the market in the first half of the year, but they still expect sales to edge slightly above the 2017 numbers.

The healthy economy and near full employment have fueled considerable interest in home buying but the sparse listings, escalating home prices, and rising interest rates drained some of the momentum from the market.  Still, new home sales have been stronger in the last few months and the company is forecasting market conditions to improve slightly and increased construction activity to alleviate some of the current supply shortages.  The economists now see total home sales (new and existing) to post a 2.5 percent increase over last year to 6.27 million units.  Even with higher mortgages rates they expect home prices will grow 6.7 percent.

"Home sales have mostly moved sideways for much of the year, but given the sizeable demand for buying in most markets, there's hope for a small breakout in the months ahead," said Freddie Mac Chief Economist Sam Khater. "Mortgage rates have stabilized in recent months, and in some high-cost markets, price appreciation is showing some signs of easing. If new and existing housing supply can increase meaningfully, sales will follow."

NAR said that the existing home inventory increased by 4.3 percent in June and rose year-over-year for the first time in over three years.  New home inventories have been slowly improving as well.  

Freddie Mac's July forecast also calls for an average 30-year fixed mortgage rate of 4.6 percent this year. The recent downturn in mortgage rates was due to declining long-term Treasury yields, which continue to be pushed down by investor anxiety surrounding the potential of a long-term global trade war.

Total single-family first-lien mortgage originations are expected to slide around 7 percent this year to $1.69 trillion, driven by decreased refinance activity due to higher borrowing costs.  Freddie Mae is also excluding all but first-lien, single-family mortgage originations from this calculation and has re-estimated its data back to 2004.  This will, it says, more closely align its estimates with others in the industry.

The U.S. labor market continues to be robust, which in turn is bringing more people into the workforce, increasing wages and spurring consumer spending and business investment. The company forecasts Gross Domestic Product (GDP) growth at 3.4 percent in the second quarter, slowing at bit in the second half to finish the year at 2.7 percent.