Freddie Mac’s housing outlook for August projects home sales will reach 6.2 million units in 2017, a 3 percent increase compared with 2016.
However, Freddie Mac said home sales would be much higher if housing inventory was not so tight. Freddie Mac said the competitive market is keeping the share of cash sales above its historical norm and dampening mortgage originations.
In June, cash sales accounted for approximately 18 percent of all home sales, below the peak of 35 percent, but still well above the historical average of 10 percent, Freddie Mac said.
“Usually, not many people like to invest a lot of cash into real estate, which is illiquid and has high transaction costs. However, in the current, highly competitive housing market, a cash offer is an effective way to gain an advantage over other bidders,” Freddie Mac Chief Economist Sean Becketti said in a release.
“In a cash sale, the seller doesn’t have to worry about the buyer’s ability to obtain a mortgage or the chances that an appraisal will come in below the agreed sales price. And each cash sale means one less mortgage origination,” Becketti added.
Freddie Mac’s outlook said housing starts during the second quarter were lower than anticipated. Although housing starts are expected to improve in the second half of 2017, Freddie Mac projects they will remain well below their long run average at around 1.24 million.
The outlook also projects home price appreciation will average 6.3 percent during 2017.
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