Fannie Mae lowered its forecast of mortgage originations and home sales as the Federal Reserve raised its rates.
Another Revision of Fannie Mae’s Projections for 2022 Housing Market
Fannie Mae’s Economic and Strategic Research (ESR) Group lowered its anticipated mortgage origination volume to $2.6T in 2022 from $2.7T in May and from $2.8T in April. Fannie also lowered its forecast of mortgage origination volume in 2023 from May’s projection of $2.25T and April’s projection of $2.41T.
Fannie’s ESR group’s projections for refinance originations remained flat at $797B for 2022. Fannie anticipates that refinance originations will increase by +$24B or 4.8% of the entire originations volume in 2023. Fannie expects mortgage rates to stabilize in 2023.
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Climbing Interest Rates Sparked Fannie’s Downward Revisions
In a statement released June 16, the day after the Federal Reserve announced its +.75% increase in interest rates, Fannie said higher mortgage rates “are the housing market’s primary constraint.”
Fannie now anticipates that total home sales will fall to 5.96 million units, or -13.5%, in 2022. Fannie also revised downward its expectations of home sales in 2023 to 5.29M from its prior forecast of 5.42M sales in 2023.
Doug Duncan, Fannie’s senior vice president and chief economist, said that the combination of slowing economic growth, stock market volatility and the sudden rise in interest rates is pinching consumers. Duncan said, “Nowhere is this more evident than in housing affordability measures, with the prospective monthly payment on a typical new mortgage climbing dramatically.”
Existing home sales fell to 5.61 M in April, a decrease of -2.4% m/m, according to Realtor.com. The total of new home sales sold in April dropped -16.6% m/m, or 591,000 homes, the lowest level in two years.
Fannie Slightly Downgrades Overall Economy
Fannie Mae marginally downgraded its forecast for 2022’s GDP to 1.2% from May’s 1.3% projection in April as Fannie anticipates that inflation and the effects of higher interest rates will continue to deflate consumers’ real incomes.
Duncan said, “Our view continues to be that the magnitude of response required of monetary and fiscal tightening to return inflation to the Federal Reserve’s target will likely result in a recession, which we currently expect will be modest and occur next year.”
Thanks to HousingWire.
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