Fannie Mae lowers 2018 origination estimates as housing market weakens

Increasing pessimism about housing is driving Fannie Mae's estimates for originations this year down a little further.

Originations are now on track to total $1.635 trillion in 2018, down from more than $1.8 trillion in 2017, according to Fannie's latest monthly outlook report. Last month, Fannie predicted originations would total $1.67 trillion this year.

"Our expectations for housing have become more pessimistic: Rising interest rates and declining housing sentiment from both consumers and lenders led us to lower our home sales forecast over the duration of 2018 and 2019. Meanwhile, affordability, especially among first-time homebuyers, remains atop the list of challenges facing the housing market," Doug Duncan, Fannie Mae's chief economist, said in a press release.

Fannie is now anticipating there will be a little over 6 million home sales this year. It previously estimated there would be more than 6.1 million. Its estimate for purchase originations this year dropped to $1.181 trillion from $1.2 trillion as a result.

Refinances are now expected to contribute $454 billion in volume to the market this year. Previously, Fannie estimated that refinancing would total $470 billion in 2018. Fannie is still anticipating a 28% refinance share for this year as compared to a 36% share last year. It continues to anticipate that the average rate for the 30-year fixed-rate mortgages that dominate the market will be 4.5% this year, up from 4% last year.

The Mortgage Bankers Association is estimating there will be $1.636 trillion in originations in 2018, 28% of which will come from refinancing.