Mortgage volume estimate cut, although new-home sales grow: Fannie Mae

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While new-home construction and sales should rise in the next 18 months, next year's mortgage origination volume estimate was cut slightly as the economy is expected to slow down soon, said Fannie Mae.

The government-sponsored enterprise's September economic outlook for 2018 was virtually unchanged at $1.67 trillion, although 2019's was cut to $1.69 trillion from $1.7 trillion in August. In June, Fannie Mae projected volumes of $1.71 trillion for each year. Last year, mortgage origination volume totaled $1.83 trillion.

"In the second quarter, we marked the ninth anniversary of the current economic expansion; however, it's also likely that we marked its high point," Fannie Mae Chief Economist Doug Duncan said in a press release. "On the whole, macroeconomic fundamentals remain strong, but signs increasingly point to a softening of third-quarter real GDP growth as trade resumes its role as a drag on GDP, and consumer and business demand growth retreat from previous highs."

"We expect full-year 2018 growth to be the best of the expansion before slowing next year as fiscal stimulus runs its course. The labor market remains solid, and with inflation continuing to straddle the Fed's 2% target, our call for two more interest rate hikes in 2018 is unchanged. We expect housing to be a drag once again this quarter," explained Duncan.

Even though originations fell below prior forecasts, housing starts should strengthen throughout the rest of the year and 2019. Single-family housing starts currently project a 5.8% year-over-year increase for 2018 and 7.2% for 2019, bolstered by a focus toward cheaper homes higher in demand.

"But in a welcome development, some construction material prices have softened, which should help builders to continue to build smaller or less expensive homes most in demand from potential first-time homebuyers. Additionally, the crunch on for-sale inventories of existing homes has eased slightly, hopefully setting up an improvement in the housing market next year," Duncan continued.

Home sales are expected to slightly decline by 0.1% year-over-year, but should inch up on a quarterly basis from the second quarter. For 2019, sales are projected to increase 1.9% year-over-year.

However, Fannie anticipates new-home sales to grow 6.1% year-over-year in 2018 and 4.8% in 2019.

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