Freddie Mac forecasts purchase uptick, refi slowdown in 2020

According to Freddie Mac’s end-of-year forecast, the housing market is primed for “modest growth” in 2020 and 2021, as healthy job growth, historically small unemployment numbers and low interest rates continue to cultivate an advantageous ecosystem.

“A more accommodative monetary policy stance and robust labor market helped the U.S. housing market regain its footing in 2019,” said Sam Khater, Freddie Mac’s chief economist. “Improved sentiment, lower financial market volatility and trade headwinds are setting up a favorable economic environment for continued real estate market growth in 2020.”

Freddie expects rates to stay low over the next two years, anticipating an average of 3.8% in both 2020 and 2021. The favorable rate structure should help the market see moderate growth, with Freddie predicting home sales increases from 6.0 million in 2019 to 6.2 million in 2020 and 6.3 million in 2021 as demand wrestles with low inventory. Home price growth will continue to slow, with annual rates of 3.2% in 2019, 2.8% in 2020 and 2.1% in 2021.

The small bumps in home sales and home prices should boost purchase originations “for the foreseeable future,” Freddie’s report added. The forecast calls for $1,261 billion in forecast originations this year, rising to $1,333 billion in 2020 and $1,277 billion in 2021.

While purchases are slated for growth, refinance originations are set to subside. Borrowers originally flocked to refinance because of decreasing rates, leading to the refi boom in the mid- to late stages of 2019. But with rates holding steady, Freddie expects that surge to recede, with refinance originations anticipated at $846 billion in 2019 before slowing to $650 billion in 2020. In 2021, refi volume is forecast to slow even further, slowing to $475 billion.

Overall annual mortgage originations are anticipated at $2.0 trillion in 2020 and $1.9 trillion in 2021.


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