Fannie Increases Several Housing Estimates for 2020
Written By: Joel Palmer, Op-Ed Writer
Economic activity during the first month of 2020 buoyed expectations of a strong year in housing and for mortgage processors and underwriters.
Fannie Mae’s most recent Economic & Housing Outlook, forecasted a 3.9 percent annual increase in residential fixed investment, following last year’s 0.1 percent contraction.
“Looking ahead, we continue to anticipate that the economy’s resilience will help keep housing on a firm growth track,” said Fannie Mae Senior Vice President and Chief Economist Doug Duncan.
“In fact, our updated housing market forecast shows greater strength in essentially every part of the housing market extending through the first half of 2021. The limiting factor for home sales, as well as the primary driver of home price appreciation, remains the supply shortage. Barring an uptick in the inventory of existing homes put on the market, in the near term we’re forecasting relatively flat home sales until higher construction activity can be sustained, which we foresee will be the case later this year.”
With mortgage rates remaining low, Fannie said refinance applications should remain strong in February after jumping 33 percent in January. Fannie also predicted that 30-year mortgage rate should remain low for the foreseeable future, explaining in the outlook report:
“The jump in refinance applications has pushed mortgage lenders’ production capacity closer to its limits. The primary spread between mortgage rates and the 10-year Treasury rate is now nearly 20 basis points higher than the business-cycle average, reflecting increased lender pricing power as refinance demand exceeds capacity. Once refinance demand slows lenders are likely to reduce rates to compete for volume, narrowing the primary spread; thus, the current low mortgage rates may be maintained in coming months even if the 10-year Treasury rises modestly.” Fannie revised upward its forecast for total mortgage originations in 2020 from $2.06 trillion to $2.28 trillion. Its forecast for refinance originations increased from $690 billion to $895 billion, while purchase originations are forecasted to increase to $1.39 trillion.
Fannie has also increased its forecast for both single-family and multi-family starts this year.
In addition to these positive numbers, mortgage delinquencies are also at a low point. Data released last week by Black Knight from its monthly Mortgage Monitor report show that mortgage delinquencies fell more than 5 percent in January, hitting their lowest level since keeping data in 2000. The decline was 14 percent lower on an annual basis.
The number of homeowners past due on their mortgages or in active foreclosure is at a near 15-year low. And prepayment activity in January was 113 percent more than in January of 2019.
The Black Knight data mirrors the recent CoreLogic Loan Performance Insights Report, which found that 3.7 percent of U.S. residential mortgages were in some stage of delinquency in October 2019. That was the lowest rate for that month in nearly 20 years.
About the Author
As an NAMP® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.
