Low rates, refi surge propel Freddie Mac’s latest origination forecast

Freddie Mac’s September housing forecast calls for a strong market to continue through this fall, including another significant bump in refinance originations.

The result, according to the government-sponsored enterprise, is a residential mortgage origination volume of $2.1 trillion in 2019.

“Despite fears of an economic slowdown, the housing market continues to be a bright spot in the economy, said Sam Khater, Freddie Mac’s chief economist. “While mortgage rates have ticked up in recent weeks, they remain lower than they were a year ago, which will help boost sales headed into the fall.”

Interest rates, Freddie predicts, will remain low for the “foreseeable future,” with the 30-year fixed mortgage rate hovering around 3.7% during the fourth quarter of this year and averaging at 4% for the entirety of 2019. In 2020, Freddie predicts an average 30-year fixed rate of 3.8%.

The historically low rates should continue to a be a boon for home sales, Freddie reported. Existing-home sales this past August beat expectations (the National Association of Realtors reported an annualized rate of 5.49 million existing-home sales during the month), and Freddie expects the momentum to carry through fourth-quarter 2019 and early 2020. Freddie Mac’s home-sales forecast, including both new and existing homes, currently sits at 5.98 million for 2019, with an anticipated rise to 6.03 million next year.

Increased sales and demand will continue to put pressure on the construction industry. Despite better-than-expected housing-starts data this past August, Freddie still anticipates single-family housing starts to remain unchanged year over year at 870,000 new homes in 2019, with growth to 940,000 new homes in 2020.

Another enduring effect of the low rates, Freddie surmised, will be seen in refinance activity. The refi sector will continue to flex its muscle for the remainder of this year, Freddie predicts, ending 2019 with a 44% share of all residential mortgage originations. Due in part to the lasting strength of the refi market during the latter part of this year, Freddie expects annual mortgage originations to grow to $2.1 trillion in 2019 (up from $1.6 trillion in 2018), before retreating to $1.8 trillion in 2020.


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