Fannie Expects Strong Production in 2Q, then a Slide

Fannie Mae economists expect the second quarter will be the high point for single-family originations this year before fundings fall below the $300 billion mark in the fourth quarter. Fannie chief economist Doug Duncan estimates originations will hit $361 billion in the second quarter boosted by the homebuyer tax credit and low mortgage rates. With rising rates, loan production will drift down to $324 billion in the third quarter and fall to $294 billion in the fourth. "We expect purchase originations to increase and refinance originations to drop off sharply," Duncan says. His forecast calls for refinancings to drop from 45% of originations in the second quarter to 36% on the third quarter and 37% in the fourth quarter. Meanwhile, total home sales will rise from 5.5 million in the first quarter to 6.01 million in the year-end quarter. "The pace of employment growth and confidence in the labor market will be key factors for a pickup in home sales by the end of the year," Duncan said.