ConDig (23-Jul-18). The US housing market is expected to pick up moderately moving into late summer as additional new home construction is set to temper current supply shortages, according to a latest forecast by Freddie Mac.

The government-owned corporation, which buys mortgages and packages them into mortgage-backed securities, also forecast new and existing home sales for the year to rise 2.5%, with home prices expected to increase 6.7%.

It comes as the US labor market remains robust, while wages are increasing and spurring consumer spending and business investment, it noted, adding that gross domestic product (GDP) growth is forecasted to be 3.4% in the second quarter and 2.7% for the year. 

“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.”

It comes as figures released last week show that total housing starts tumbled in June to a seasonally adjusted annual rate of 1.17 million compared with a revised down total of 1.337 million the month prior instead of a previously reported 1.350 million-unit rate.

Despite this, homebuilder confidence remained unchanged in July as robust demand for homes offset concerns over rising material costs.

Construction industry leaders continue to warn that rapidly rising materials costs and a deepening shortage of labor could delay some projects and make others financially unviable.

A rise in material costs has been exacerbated follow a decision by President Trump to slap a 25% tariff on imported steel and a 10% duty on foreign aluminum from Canada, Mexico and the European Union on May 31.