ORLANDO – (Realty News Report) – CoreLogic presented its 2018 housing market outlook at the NAHB International Builders’ Show in Orlando on Tuesday, predicting Houston will lead the nation in new home sales this year, followed by Dallas. Austin and San Antonio are also expected to rank among the top seven markets for new home sales.
Frank Nothaft, chief economist at CoreLogic — an Irvine, California-based company that provides financial, property and consumer information, analytics and and business intelligence — cautioned that Houston is seeing a notable rise in early-stage mortgage delinquency rates, largely driven by the effects of Hurricane Harvey. Tracking early-stage delinquencies is an important indicator of mortgage market health.
“Houston’s delinquencies almost doubled year-over-year, and that increase is due almost entirely to Hurricane Harvey,” Nothaft said. CoreLogic reported that 10.9 percent of Houston-area mortgages were 30 days or more delinquent in October, up from 5.8 percent in October 2016.
Attendees at the three-day International Builders’ Show generally agreed mortgage rates are likely to average roughly 4.5 percent by late 2018, with further increases expected the following year. Multifamily starts are projected to continue a downward trend.
NAHB Chief Economist Robert Dietz noted that as the broader economy strengthens, the National Association of Home Builders expects 30-year fixed-rate mortgages to average 4.31 percent in 2018 and 4.82 percent in 2019.
“NAHB projects 1.21 million total housing starts in 2017 and expects overall production to grow by about 2.7 percent this year to 1.25 million units,” Dietz said. “Single-family starts are expected to rise 5 percent in 2018 to 893,000 units and increase another 5 percent to 940,000 in 2019.”
Despite gains in single-family construction, multifamily starts are forecast to decline. NAHB predicts multifamily starts will edge down 1.6 percent in 2018 to 354,000 units, from a projected 360,000 in 2017, driven primarily by shifts in supply and demand.
David Berson, senior vice president and chief economist at Nationwide Insurance, told the Orlando audience he expects mortgage interest rates to climb somewhat faster this year, but not at a pace that will significantly dampen housing activity.
“Mortgage rates are expected to rise from about 4 percent to roughly 4.5 percent by year-end,” Berson said, “which should be balanced by strong housing demand and solid wage growth.”
Nothaft of CoreLogic warned that even modest increases in interest rates can affect housing affordability and may discourage homeowners with low existing mortgage rates from moving and trading up.
“Higher rates reduce owner mobility,” Nothaft said. “That lowers the number of homes offered for sale. Supply has been tight, and for-sale inventory will likely remain limited.”
Nationally, CoreLogic reported the mortgage delinquency rate at the end of October was approximately 5.1 percent, a 0.1 percentage point change from October 2016, when it stood at 5.2 percent. Most of the increase was attributed to the impacts of hurricanes Harvey, Irma and Maria.
“Texas markets such as Houston, Beaumont, Victoria and Corpus Christi peaked at over seven percent in September but showed improvement in October,” Nothaft added.
Berson noted that inflation is trending upward. “Core inflation is projected to edge higher in the coming years as the economy grows above trend, tightening labor and product markets,” he said. “We expect inflation to move above the Federal Reserve’s 2.0 percent target within the next year.”