With mortgage rates expected to remain unchanged at 3% through the end of 2021, Freddie Mac has raised his mortgage origination forecast for this year to nearly $ 3.6 trillion.
"Even as the economy faces the challenges of the coronavirus pandemic, the real estate market has shown strength," said Sam Khater, Freddie Mac's chief economist, in a press release. "Refinancing activity is solid and the demand for home buyers continues, resulting in higher sales and an acceleration in house price growth."
Freddie Mac publishes its forecast quarterly. In its last forecast in June, the GSE forecast a volume of 2.9 trillion US dollars this year. The rate forecast in the June release was higher, at 3.3% for the remainder of the year and 3.2% for the next year as a whole.
But even if rates for the next year are expected to be 20 basis points below expectations in the previous forecast, Freddie Mac's outlook for 2021 has been raised only slightly to $ 2.7 trillion from $ 2.5 trillion in June.
In his September forecast, Fannie Mae forecast mortgages of $ 3.9 trillion this year and $ 2.6 trillion in 2021. Meanwhile, the Mortgage Bankers Association forecast $ 3.1 trillion for this year and $ 2.2 trillion next year in September. Unlike Fannie and Freddie, MBA chief economist Mike Fratanoni expected rates to rise from now through the fourth quarter of next year.
In terms of purchasing activity, Freddie Mac sees a slight increase in volume for 2021 compared to this year. For 2020, Freddie Mac expects purchase origins of $ 1.41 trillion, while for 2021, it expects $ 1.44 trillion.
"While construction has recovered, the slowdown in activity in the spring and early summer of 2020 will result in fewer new homes for sale over the next year," said a blog that accompanies Freddie Mac's forecast. "We therefore forecast a slight decrease in home sales to 6.1 million in 2021."
But even if interest rates stay flat, refinancing volumes are expected to decrease 43% over the next year, from $ 2.17 trillion to $ 1.24 trillion. However, Freddie Mac continues to believe that refi originations will outperform purchases in the first quarter of next year.