Millennials are likely to strengthen the housing demand.

Rising interest rates will not disrupt the U.S. residential origination volumes or performance, according to S&P Global Ratings. In its latest report titled "U.S. Residential Mortgage Finance 2019 Outlook: Rising Interest Rates Likely Won't Disrupt Mortgage Volumes or Performance," S&P indicated that the relative effect of rising interest rates on housing affordability in the U.S. will become less pronounced in 2019. This is on account of moderation in home price growth, rising wages, and shifts in demographics wherein millennial home purchases will surge, the report noted. Although the housing finance reform will remain in the limelight, the recent increase in the conforming loan limit hints at only a slight chance of change in 2019. 

S&P also stated that the latter part of 2018 marked a turning point in the historically low interest rates and strong home price appreciation (HPA) that prevailed over the past several years. However, the increase in rates became more substantial, and home prices showed signs of cooling off in the latter part of the previous year relative to the 5-7 percent annual HPA recorded since 2014. The report projects tempered HPA this year, with home purchase lending volume outpacing that in 2018 as refinancing activity falls with increased interest rates. The Outlook article stated that rising rates will only be a mild deterrent to purchase activity in 2019. The annual volume of origination is anticipated to flatten with a shift to purchase originations from refinancings. The report also revealed that the non-qualified mortgage market expected to experience the largest percentage growth. As Millennials enter the housing market, it is likely to strengthen the housing demand across the U.S., it noted. 

Source: MReport