With supply constraints continuing to hinder the housing market, Fannie Mae has made moderate revisions to its 2021 housing forecast, moving its home sales projection slightly higher but adjusting its originations expectations modestly downward.
The government-sponsored enterprise (GSE) now expects 2021 total home sales to be 3.3% higher than last year, a small uptick from its prior forecast of 3.1%. While midsummer existing-home sales came in stronger than expected, Fannie economists noted that other market indicators, including purchase mortgage applications and pending home sales, suggest some sales softening on the horizon, leading to a muted upward revision.
The major headwind for the market, Fannie said, remains the omnipresent home supply shortage that has dogged the market for the last few years, limiting sales growth and driving appreciation to price many out.
Despite a modest potential influx of listings as the foreclosure moratorium ends, Fannie expects the tight supply to endure over the next few quarters. High input costs and labor scarcity remain big concerns for the homebuilding industry, and though the number of units under construction is on the upswing, it is taking builders longer to complete homes. This has led to a large backlog in construction, pushing some completions initially slated for the end of this year to 2022. Consequently, GSE has edited its new-home sales and single-family starts forecasts with some slight pullback; fourth-quarter new-home sales are now expected at 789,000 units, down from 846,000 units in the previous forecast.
As for originations, Fannie now expects 2021 mortgage originations of $4.3 trillion, down from the prior forecast of $4.4 trillion. If realized, that would be a slight decrease from last year’s total origination volume of $4.5 trillion.
Purchase volume in 2021 is now projected to total $1.8 trillion, a minor decrease from the previously month’s forecast. If realized, however, that’s still up from last year’s purchase total of $1.6 trillion.
Refinance volume likewise saw a slight downgrade from the previous forecast, down $11 billion from last month to a now-projected $2.5 trillion. If that bears true, it would be a reduction from last year’s total refi volume of $2.9 trillion. The refi share of total originations is now expected to fall from 64% last year to 58% this year.
For 2022, purchase volumes are expected to grow 6.3% to $1.9 billion, while the refi projection was revised down to $1.3 trillion. That would be a total of $3.3 trillion in originations, with the refi share dropping further to 40%.
