Freddie Mac announced Wednesday that August forecasts show mortgage origination will reach $2 trillion in 2019, driven mostly by the recent surge in refinancing due to historically low mortgage rates.
“Despite fears of an economic slowdown, the U.S. labor market stands firm. Specifically, jobless claims are near historic lows,” said Sam Khater, Feddie Mac’s Chief Economist. “This strong labor market, along with mortgage rates at three-year lows and consumer confidence holding strong, will set the stage for continued improvement in the housing market heading into the fall.”
Freddie Mac forecasts the 30-year fixed rate mortgage to remain around 3.6% for the remainder of 2019 and through Q2 2020. The GSE announced the average rate of a 30-year fixed rate mortgage for the week ending August 29 was 3.58%.
Home-prices forecasts remain unchanged and are expected to appreciate 3.4% in 2019. Forecasts for single-family housing starts decreased slightly to 870,000 new homes for the year and 940,000 in 2020.
Freddie Mac projects the combination of increased housing demand and increasing housing supply to impact home sales. Forecasted sales for 2019 are 5.94 million, and are expected to rise to 6.04 million in 2020. Mortgage originations are expected to hit $1.8 trillion in 2020.
While mortgage originations climb higher, CoreLogic reports what the homebuyer is paying dropped. Despite sales prices rising 3.4% annually in May, CoreLogic reported the typical mortgage payment fell 2.9% due to a 0.5% drop in mortgage rates.
Sales prices in May 2018 were up 7% from the year prior and the typical mortgage payment was 15% higher because of a 0.6% increase in mortgage rates.
CoreLogic’s Home Price Index (HPI) reveals annual increases in home prices through May 2020 will average 4.6%. However, coupled with an average of six mortgage forecasts, the HPI states the typical mortgage payment will fall 3.3% over the next year.
“The trend is driven by the expectation that, on average, the rate on a 30-year fixed-rate mortgage during the June 2019-through-May 2020 period will be almost 0.7 percentage points lower than during the year-earlier period,” the report states.