The Mortgage Bankers Association has raised its 2020 creation forecast to over $ 3 trillion, but is more conservative than Fannie Mae in its outlook.
The two forecasts differ the most in terms of funding volumes.
In its September forecast, the MBA predicts a total of $ 3.14 trillion, with 56% coming from refinancing. This compares to the August outlook of $ 2.98 trillion, with Refis having a 55% production share.
However, Fannie Mae sees 2020 as a potential record year (by his standards) for lending at $ 3.87 trillion, including the second and third quarters with a total of over $ 1 trillion each. This forecast provides for a refinancing share of 63% for the year, a share of 69% in the second quarter alone.
The difference between the two perspectives depends on how the two see interest rate movements, MBA chief economist Mike Fratantoni said in an interview.
Fannie Mae expects the 30-year fixed-rate mortgage to drop below 3% in the fourth quarter and stay there through 2021. The MBA's forecast is that interest rates will rise from 3% for the current quarter to 3.3% by the fourth quarter of next year.
"We believe that given an improving economy and the fact that the Fed will eventually slow down its asset buying pace, government bond interest rates and yields will rise somewhat," Fratantoni said. "Couple that with, as the Congressional Budget Office pointed out yesterday, huge federal budget deficits that will result in very substantial funding needs for the Treasury Department. We believe this will push interest rates up a little."
The outlook could change depending on whether there is another significant wave of new COVID-19 cases or whether a vaccine is delayed to market. A sharp economic downturn could mean rates stay in current ranges, although the MBA considers this scenario less likely, Fratantoni said.
The forecasts for MBA and Fannie Mae are better aligned in terms of purchasing volume for this year and next.
Home purchases should benefit from positive trends in the labor market as well as a very large number of household formations, with millennials reaching the highest age of first time buyers. These factors, along with low mortgage rates, will support this activity for the next several years, Fratantoni said.
In the report on the sale of existing properties published on Tuesday, a monthly increase in transactions of 2.4% was recorded. An 11.4% year-over-year increase in house prices was due to the lack of inventory.
Restrictions on supply and the tightening of credit availability are top concerns about the growth of the real estate market over the next year, according to Joel Kan, associate vice president of MBA.
"It is worrying that the housing stock continued to decline last month, down over 18% from 2019," Kan said. "This lack of supply continues to drive home price growth soaring. The 11% rise in prices is well above income growth and threatens overall affordability, especially for first-time buyers."
Credit availability for borrowers has tightened during the pandemic. The MBA reported earlier this month that the index for mortgage credit availability was at a six-year low. But conditions are likely to be better for the next year as the stock market improves and most lenient borrowers start making payments again, Fratantoni said.
"But if it stays very tight and we really rely on potential first-time buyers to supply the buy market next, credit will be an obstacle too," he continued.
The MBA forecasts a volume of $ 2.2 trillion in 2021, a slight increase from the August forecast of $ 2.1 trillion. Next year the group expects 65% of the origins to come from purchases and 35% from refis. The forecast for 2022 is unchanged at $ 1.9 trillion, with 78% of that coming from purchase credits.