Both Freddie Mac and Fannie Mae’s March forecasts are quite upbeat for the spring selling season. Lower than expected mortgage interest rates, moderating home prices, rising sales demand and more housing inventory are the elements both government-sponsored agencies predict will heat up spring sales. Let’s look at the specific views of each GSA individually.
Freddie is more optimistic about potential sales volume in the housing market than in the country’s annual GDP growth rate. Freddie predicts GDP will rise to 2.0% through the remainder of 2019 and anticipates it to edge down to 1.8% by 2020. Freddie also forecasts the unemployment rate to hover around 3.8% through 2019 and 3.9% in 2020.
Concerning interest rates, Freddie Mac’s chief economist Sam Khater told HousingWire, “The real estate market is thawing in response to the sustained decline in mortgage interest rates and is rebounding in consumer confidence, two of the most important drivers of home sales. Rising sales demand coupled with more inventory than previous spring seasons suggest that the housing market is in the early stages of regaining momentum.”
The agency predicts mortgage interest rates to average out at 4.5% in 2019 and 4.8% in 2020. Freddie expects an increase of +1.5% in mortgage lending this year while the Mortgage Banking Association predicts an increase of +1% in mortgage lending. iEmergent, a mortgage forecasting and advisory firm, projects a whopping +3.9% jump in total home loan volume in 2019. The firm’s director of forecasting, Mark Watson, is calling for $1.2T in mortgage purchase lending along with single-family mortgage originations rising +1.6%, the equivalent of $1.67T, through 2019 and into 2020, making 2019 the best year in purchase lending since 2005.
Freddie also projects housing starts to grow from 1.27M in 2019 to 1.33M in 2020; total home sales to grow from 5.94M in 2019 to 6.14M in 2020; and expects home prices to increase +3.5% in 2019 and +2.5% in 2020.
Fannie Mae is not as specific in its predictions as Freddie Mac but is equally optimistic. Fannie’s latest Home Purchase Sentiment rose 5.5 points in March 2019 to 89.8. (Any point count over 80 is considered to be a bonanza.) Fannie’s “Good Time to Buy” sentiment rose by 7 percentage points in March and its “Good Time to Sell” sentiment rose by 13% percentage points.
Doug Duncan, Fannie Mae’s senior vice president and chief economist, said to HousingWire, “A brighter housing market outlook drove this month’s increases – a welcome sign from consumers as we enter the spring and summer home buying seasons. These results further corroborate the positive effects of falling mortgage rates on affordability, which we expect will help support a rebound in home sales.”
Duncan added, “Meanwhile, job confidence…also continues to support housing sentiment, while income growth perceptions firmed from both prior month and year ago levels.”