According to Freddie Mac’s Quarterly Forecast, low mortgage rates are expected to increase only gradually later this year, leading the GSE to forecast that the housing and mortgage market will remain strong through 2021.
“As the economy continues to mend, the housing market remains strong even as certain obstacles have begun to slow sales across the country,” says Sam Khater, Freddie Mac’s chief economist. “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.
“Despite the housing market’s recent highs, there are indications of softening demand in recent home purchase mortgage applications data,” he adds. “We expect refinance activity to soften as higher mortgage rates dampen activity. Overall, we forecast total originations to be $3.9 trillion in 2021 before declining to $2.6 trillion in 2022.”
The average 30-year fixed-rate mortgage (FRM) is expected to be 3.1 percent in 2021 and 3.7 percent in 2022. In 2020, the 30-year FRM 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. Meanwhile, refinance originations are expected to soften, declining from $2.2 trillion in 2021 to $713 billion in 2022.
Overall, annual mortgage origination levels are expected to be $3.9 trillion in 2021 and $2.6 trillion 2022. These levels were $4.1 trillion in 2020.
More details can be found here.