- Fannie Mae and Freddie Mac say yes
- Both GSEs revised forecasts down due to rising mortgage rates
Fewer Mortgage Originations in 2021 Predicted by Fannie Mae and Freddie Ma
Both mortgage giants Fannie Mae and Freddie Mac are predicting a slowdown in the housing market in 2021 that will continue into 2022.
Even though demand is currently off the charts, rising mortgage interest rates could well dampen that demand.
Fannie indicated in its revised housing market forecast that mortgage originations will drop from 4.5T in 2020 to just under 4T in 2021 and to just under 3T in 2022.
Freddie’s revised forecast was even lower. It is projecting that mortgage originations will fall to $3.5T in 2021.
Housing Market Obstacles
The ongoing imbalance in supply and demand is causing key market experts to revise their forecasts on home prices. For example, the Federal Housing Finance Agency (FIFA) has forecast home prices to rise +8% in 2021, up from its previous forecast of 4.2%. FIFA then projects home prices to decelerate to +2.9% on an annualized basis in 2022, as measured by the FHFA Home Price Index.
Freddie Mac chief economist Sam Khater said, “Higher mortgage rates have the potential…to dampen the robust demand we’ve been experiencing, and we therefore forecast total originations to decline $3.5T in 2021.”
The ESR Group is revising downward its annual home sale forecast. Though much of its less optimistic forecast is due to less demand for refinances because of mortgage interest rate increases, the ESR Group is still predicting home sales to increase +6.2% and purchase mortgage originations to increase +14.5% y/y in 2021.
Freddie Mac is predicting home prices to go up +6.6% in 2021 and expects home sales to hit 7.1M in 2021 as well. Then, in 2022, Freddie predicts that home price growth will slow to 4.4% and that home sales will decline to 6.7M. Freddie’s forecast sees purchase originations increasing to $1.7T in 2021 and then falling to $1.6T in 2022.
Thanks to Inman.
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