Freddie Mac cuts 2020 forecast on lower expected refi volume

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Freddie Mac reduced its origination forecast for 2020 to under $2 trillion, now projecting $184 billion less in refinance volume compared with its November outlook.

However, modest increases in home prices and home sales will lead to increased purchase mortgage volume on a year-over-year basis both in 2020 and 2021.

The government-sponsored enterprise now calls for $1.98 trillion in loan originations in 2020 — down from $2.11 trillion this year — and $1.85 trillion in 2021. However, in November, Freddie Mac projected an increase in 2020's originations to $2.13 trillion from $2.1 trillion for 2019.

Refinance volume for 2020 now projects to be $650 billion; in the November forecast, Freddie Mac predicted $834 billion.

Home sales are expected to increase from 6 million in 2019 to 6.2 million next year and to 6.3 million for 2021. House price growth will continue to decelerate with annual rates of 3.2%, 2.8% and 2.1% in 2019, 2020 and 2021, respectively.

Rates are expected to remain steady at an average of 3.8% for the 30-year fixed loan through the end of 2021.

"A more accommodative monetary policy stance and robust labor market helped the U.S. housing market regain its footing in 2019," Sam Khater, Freddie Mac's chief economist, said in a press release. "Improved sentiment, lower financial market volatility and trade headwinds are setting up a favorable economic environment for continued real estate market growth in 2020."

Purchase volume will increase to $1.33 trillion in 2020 from $1.26 trillion in 2019. The December estimate is approximately $30 billion higher than November's. For 2021, purchase originations should near $1.38 trillion.

Fannie Mae went in the opposite direction in its December forecast for 2020, raising its projection by $174 billion to $2.04 trillion. The Mortgage Bankers Association now predicts $1.91 trillion for 2020, up from its November forecast of $1.89 trillion.

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Freddie Mac Refinance Purchase Mortgage rates forecast GSEs Economy