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Concern about future world economic growth and uncertainty around trade and monetary policy have put downward pressure on interest rates. As of the first week of June, the U.S. weekly average 30-year fixed mortgage rate was 3.82%, the lowest since September of 2017. Low mortgage rates along with a strong labor market will help housing markets post modest growth over the next year and a half. We expect refinance mortgage originations to receive a boost in 2019, increasing about 20% relative to 2018.
While real GDP grew at an annual rate of 3.1% in the first quarter, it is unlikely to persist into the second half of 2019. Second quarter growth is tracking around half of first quarter growth at 1.5% through May. In the second half of the year, we anticipate that trade tensions and the waning effects of last year’s fiscal stimulus will put downward pressure on growth. For the full year 2019, we forecast GDP growth of 2.2%, decelerating to 1.8% in 2020.
The surge in gasoline prices in the second quarter of 2019 and carryover effects on other goods and services will likely lead to higher consumer prices. Due to these increasing costs, combined with the possible effects on import prices from trade disputes, we expect consumer prices to rise by 3.0% and 2.4% in the second and third quarter of 2019, respectively. This upward revision increases our forecast for consumer price growth in 2019 to 2.1%, and we forecast a similar increase in 2020.
The employment situation report released by the Bureau of Labor Statistics for May showed that the unemployment rate remained at 3.6%, unchanged from last month. We forecast continued strength in the labor market with the unemployment rate inching up in the second half of the year but remaining at the low end of its historical range. Overall, we expect the unemployment rate to stay unchanged from the previous forecast at 3.8% and 3.9% in 2019 and 2020, respectively.
Concerns about global growth and ongoing trade disputes have pushed long-term interest rates lower resulting in mortgage rates seeing their lowest level since the fall of 2017.
We have revised down our forecast for the 10-year and 1-year Treasury rates. The 10-year Treasury rate is expected to decline to 2.4% and 2.5% in 2019 and 2020, respectively. Also, we lowered the 1-year Treasury rate forecast to 2.2% in 2019 before increasing to 2.3% in 2020.
We expect mortgage rates to follow Treasury yields with the 30-year fixed-rate mortgage averaging 4.1% in 2019, before increasing modestly to 4.2% in 2020.
Strengthening homebuilder confidence, an increase in the level of housing permits, and low mortgage rates are expected to translate into stronger housing starts and increased home sales. Our annual forecast for housing starts has increased to 1.26 million and 1.35 million in 2019 and 2020, respectively. We anticipate home sales to reverse the 2018 slump and come in stronger at 6.03 million in 2019 before surpassing 2017 levels and increasing to 6.19 million in 2020.
In line with recent trends, house prices are expected to appreciate 3.6% in 2019 before moderating in 2020 at 2.7%, a slightly higher growth rate from our forecast last month.
We expect mortgage originations, particularly mortgage refinance originations volumes, to benefit the most from low mortgage rates in 2019. We expect refinance originations volume to rise around 20% in 2019. We also expect lower mortgage rates to translate into higher annual mortgage origination levels of $1.8 trillion and $1.7 trillion in 2019 and 2020, respectively.
PREPARED BY THE ECONOMIC & HOUSING RESEARCH GROUP
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