Key Highlights

  • Mortgage lending expected to hit $3.14T in 2020, according to Doug Duncan, chief economist with Fannie Mae
  • Mortgage applications +19% y/y and +4.1% from week prior
  • Home prices rose +4.9% y/y in May though declined -0.3% m/m, according to Federal Housing Finance Agency
  • Median existing-home prices rise for 100th consecutive month in June 2020, according to National Association of REALTORS®

 Fannie Mae chief economist Doug Duncan is forecasting mortgage lending to hit $3.14T, a seventeen-year high, in 2020. Such a level of mortgage lending is almost unfathomable in the midst of unemployment levels not seen since the Great Depression and potentially 20M – 28M people dealing with eviction notices.

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Duncan made it clear in his latest videoconference with HousingWire that he based his forecast on the open-ended commitment of the Federal Reserve to purchase $40B/month in mortgage-backed securities for, according to Fed Chair Jerome Powell as long “as needed.” Coupled with that commitment by the Federal Reserve, Duncan also expects “margins,” the difference in 10-year Treasury yields and mortgage bonds, to shrink as lenders in this country adjust to doing business in the midst of the continuing and devastating COVID-19 pandemic.

Duncan also forecasts average mortgage interest rates to drop to 2.8% in 2021. Currently, as of the week of July 15, the average 30-year fixed rate mortgage was 3.20% while some borrowers with super excellent credit scores were offered rates below 3.0%.

Such low interest rates spurred the Mortgage Banker’s Association (MBA) market composite index to jump +4.1% from the week before. The unadjusted purchase index was up +2% week over week and +19% higher than the same week last year.

The median existing-home price rose to $295,300, an increase of +3.5% y/y. May 2020 marked the 100th consecutive month of rising home prices. June brought an eye-popping increase of +20.7% in total existing home sales after the pace of sales has been grueling. Even at a +20.7% increase in sales, the annual sales growth continued to be off -11.3% from June 2019.

Ruben Gonzalez, Keller Williams’ chief economist, believes that the fate for the housing market is tied to the nation’s response to the COVID-19 pandemic. For the housing market to recover in the midst of staggeringly high unemployment and pending mass evictions, Gonzalez believes that Congress is mandated to follow up and build upon the CARES Act. “This means extending aid programs and continuing to fund increased testing, as well as addressing the challenges faced by state and local governments.” Gonzales went on to say that “…keeping workers attached to jobs, (keeping workers) current on rent and mortgages, and focusing aid on those who are most likely to spend should continue to be priorities.”

Perhaps the housing market will lead the country’s overall economic recovery as long as muscular homebuyer demand and low rates continue?

Thanks to InmanNews and HousingWire.

Also read: Mixed Reviews for Housing Market, Purchase Applications Up – Buyers Are Back, Moody’s Analytics – 60% Chance of Recession