Freddie Mac: Here’s what to expect from the housing market in 2020 and beyond
Just over a year ago, mortgage rates nearly hit 5%, levels that hadn’t been seen since the early part of this decade. But as we get ready to move into a new decade, mortgage rates are more than a full percentage point lower than that, comfortably back in the 3-4% range.
And according to a new forecast from Freddie Mac, mortgage rates should stay that low for the rest of
this year and well beyond that.
In Freddie Mac’s newest housing market forecast, the
company’s economic and housing research group states that they expect mortgage
rates to remain around 3.8% for the rest of 2019 and stay at that level for all
of 2020 and 2021.
As other recent forecasts and mortgage market data has shown, this year’s unexpectedly low mortgage rates have driven a rise in refinances, as well as a surge in home purchases.
A recent forecast from the Mortgage Bankers Association shows that 2019 is expected to be the best year for refis since 2016, and the best year for purchase mortgages since 2006.
Freddie Mac agrees and expects the good times to keep
rolling. In its latest forecast, the government-sponsored enterprise expects
there to be $846 billion in refinance originations this year, and $834 billion
more in refis next year.
Both of those figures would be more than $300 billion more
in refis than there were in 2018.
On the purchase side, Freddie Mac expects there to be $1.255
trillion in purchase originations this year. And the GSE expects those figures
to rise in both 2020 and 2021.
According to Freddie Mac, it expects there to be $1.299
trillion in purchase originations in 2020 and $1.369 trillion in purchase
originations in 2021.
Overall home sales are also expected to rise in each of the
next two years. According to Freddie Mac, it expects to see 6 million home
sales in 2019, 6.1 million home sales in 2020, and 6.2 million in 2021.
Despite home sales and purchase originations projected to
rise over the next few years, Freddie Mac currently expects 2021 to see a
decline in total mortgage volume from 2020’s expected level due to a decline in
The GSE’s forecast expects to see just $429 billion in refis
in 2021, perhaps a function of there simply not being that many people left who
have not refinanced their mortgage by then, especially if mortgage rates stay
as low as they are currently expected to.
Overall, Freddie Mac expects there to be $2.101 trillion in
total mortgage originations in 2019, $2.132 trillion in originations in 2020,
and $1.798 trillion in 2021.
The GSE also expects home price growth to slow over the next few years, with annual growth rates of 3.2%, 2.9% and 2.1% in 2019, 2020 and 2021, respectively.
“The economy has seen increased volatility in November as
hopes for a favorable resolution to the trade dispute have recently waned,”
said Sam Khater, Freddie Mac’s chief economist. “However, given low interest
rates, modest inflation and a solid labor market, the U.S. housing market continues
to stand firm, and, our forecast is for the housing market to maintain momentum
over the next two years.”
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