Housing Market Expected to Remain Strong Despite Supply, Price Concerns
The low mortgage rates that have supported the housing market throughout the pandemic will likely increase later this year, but just gradually, said Freddie Mac, McLean, Va.
Therefore, the market should remain strong through 2021, Freddie Mac said in its Quarterly Forecast.
“As the economy continues to mend, the housing market remains strong even as certain obstacles have begun to slow sales across the country,” said Sam Khater, Chief Economist with Freddie Mac. “Of note, high house price growth has been buoyed by increased demand due to low mortgage rates, disposable after-tax income that has risen during the current recession and a major shortage of housing supply relative to our population.”
Khater noted despite the housing market’s recent highs, “there are indications of softening demand in recent home purchase mortgage applications data. We expect refinance activity to soften as higher mortgage rates dampen activity,” he said.
Freddie Mac forecast total originations will reach $3.9 trillion this year before declining to $2.6 trillion in 2022. The forecast also said:
–The average 30-year fixed-rate mortgage is expected to be 3.1 percent in 2021 and 3.7 percent in 2022. Last year the 30-year fixed-rate mortgage averaged 3.1 percent.
–House price growth is expected to be 12.1 percent in 2021, slowing to 5.3 percent in 2022. Growth was 11.3 percent in 2020.
–Home sales are expected to reach 6.9 million in 2021, remaining flat in 2022. Sales were 6.5 million in 2020.
–Purchase originations are expected to increase to $1.8 trillion in 2021 and $1.9 trillion in 2022. This is up from $1.5 trillion in 2020.
–Refinance originations will likely soften, declining from $2.2 trillion in 2021 to $713 billion in 2022. This is down from $2.6 trillion in 2020.
–Overall, annual mortgage origination levels are expected to be $3.9 trillion in 2021 and $2.6 trillion 2022. These levels equaled $4.1 trillion in 2020.