Mortgage

Fannie and Freddie increase forecasts for 2021 as a result of vaccine distribution

With vaccinations ongoing and a larger stimulus package expected with the new Biden administration, Fannie Mae and Freddie Mac improved their housing projections for 2021 in January.

Fannie Mae projected annual purchases of over $ 1.75 trillion and expects refinancing to reach $ 2.16 trillion. Both numbers are significant increases from the December forecast of $ 1.66 trillion for purchases and $ 1.8 trillion for refis. Expectations for total emergence in 2021 soared to about $ 3.91 trillion from $ 3.47 trillion in the previous month, while 2020 should end near $ 4.41 trillion – also down from the estimated $ 4 . $ 29 trillion in December. Fannie Mae continues to forecast a 30-year fixed rate mortgage averaging 2.7% for the year.

"COVID-19 remains the dominant force that is changing the way business is shaped by the behavior of people, companies and policy makers," said Doug Duncan, SVP of Fannie Mae and chief economist, in a press release. “So the best policy for economic recovery is the widespread use of an effective vaccine that is currently in use. The sooner this can be successfully achieved, the faster growth can accelerate, and we expect vaccine distribution efforts will be well established by mid-year, allowing for a strong second half. "

Fannie's January forecast projects a slight increase in annual residential real estate to 1.45 million from 1.44 million in December. Any upward movement will help the historical stock shortage and increase the number of purchases. The company increased expected home sales for 2021 to 6.72 million from 6.66 million in the previous month. Sales in 2020 are estimated at 6.47 million.

"One effect of our forecast growth acceleration is likely to be a slight rise in interest rates, be it due to increased growth expectations – as consumer savings are boosted by incentives for higher consumer spending – or outperforming a recovery in supply due to a moderate increase in inflation due to the growth in demand," continued Duncan gone.

Freddie Mac's most recent quarterly forecast isn't quite as rosy, but it offers a lot more optimism compared to the third quarter.

Freddie expects an average interest rate of 2.9% for 30 years after 3% in the previous quarter. The company has a $ 1.55 trillion purchase volume, $ 1.75 trillion refinancing, and 6.5 million homes sold. All three numbers exceeded the third quarter forecast of $ 1.45 trillion, $ 1.24 trillion and $ 6.1 million, respectively.

"Despite the uncertainties of the pandemic, the real estate market performed well in the second half of 2020," said Sam Khater, Freddie Mac's chief economist. “Low mortgage rates and the ability to work remotely continued to support housing demand, which is reflected in home sales that have not been seen since 2006. Starting in 2021, we expect a slight increase in interest rates, which will likely affect the origins of refinancing, a remarkable year. We therefore forecast a slight decline in total origins to $ 3.3 trillion, but remain strong this year. "

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