Fewer sales of existing homes and uncertainty around future fiscal policies will result in fewer mortgage originations than previously expected, according to Fannie Mae.

The government-sponsored enterprise lowered its 2018 origination forecast for the third time this year, primarily due to fewer existing home sales and purchase mortgages. Fannie's projection for 2018 refinance volume did not change from the June edition of its report.

Mortgage originations are now expected to hit $1.69 trillion in 2018 and $1.7 trillion for 2019, Fannie Mae said, down from last month's projections of $1.71 trillion in both 2018 and 2019. These totals all lag 2017's origination volume of $1.83 trillion.

Origination forecast

"Along with ongoing tightening of monetary policy, we expect fiscal stimulus, which has supported consumer, business and government spending, to weaken as we move into 2019," Fannie Mae Chief Economist Doug Duncan said in a statement. "And while trade provided a meaningful lift last quarter — owing in part to overseas firms pulling forward their imports from the U.S. ahead of the announced tariffs — we expect trade will likely once again be a drag on growth moving forward."

Existing-home sales are now projected to reach 5.5 million, while new-home sales should add another 675,000 transactions in 2018, down slightly from last month's forecast. Combined, home sales should reach 6.16 million, about 0.7% lower than 2017 levels.

"On housing, the same inventory constraints continue to haunt affordability and sales, with demand outstripping supply and home prices continuing to rise at a fast clip as a result," Duncan said.

Fannie now expects housing starts to increase 8.3% in 2018, a slight increase from its previous estimate of 8% year-over-year growth. Starts will increase an additional 4.9% in 2019. In 2017, housing starts were 8.6% higher than the previous year.

Fannie Mae calculates a continued rise in mortgage rates over the remainder of 2018 and into 2019.

Thirty-year fixed mortgage rates are expected to settle at 4.5% for 2018 — an increase of 50 basis points from last year — and grow to 4.6% for 2019. A bigger jump is expected for five-year adjustable-rate mortgages, going from 3.2% in 2017 to 3.8% in 2018 to 4.1% in 2019.

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