Home Topics Real Estate The real estate market is about to slow down, says Fannie, Freddie

The real estate market is about to slow down, says Fannie, Freddie

The booming real estate market could slow down – Fannie Mae and Freddie Mac predict a decline in mortgage origins in 2021.

The economy is improving, homebuyer demand remains strong, and restrictions from the COVID era are easing, but mortgage giants Fannie Mae and Freddie Mac each predicted a slowdown in the property market as mortgage origins decline in 2021.

Fannie Mae revised his forecast downward to predict that mortgage origins will decrease from 4.5 trillion in 2020 to just under 4 trillion this year and to just under 3 trillion in 2022. Freddie Mac’s forecast was even lower, indicating that higher mortgage rates have the potential to dampen the situation robust demand The real estate market has had experience and is forecasting a decline in total origins to $ 3.5 trillion in 2021.

Fannie Mae said that while residential demand remains strong, the ESR Group revised its forecast for annual home sales down slightly due to persistent supply bottlenecks and slightly higher prospects Mortgage rates. Even so, she forecast that much of the decline would be due to refinancing, as home sales and mortgage origins are expected to increase 6.2 percent and 14.5 percent, respectively, in 2021 year over year.

Given the persistent imbalance between supply and demand, house prices are expected to rise 8 percent in 2021 – up from a previously forecast 4.2 percent – before slowing down to 2.9 percent in 2022 as measured by the FHFA House Price Index.

Sam Khater | Photo credit: Freddie Mac

“As the economy continues to improve, we expect conditions for the property and mortgage markets to remain generally favorable,” said Sam Khater, Freddie Mac’s chief economist. “However, higher mortgage rates have the potential to dampen robust demand, so we predict total origins will drop to $ 3.5 trillion in 2021.

He added: “Other important barriers to be considered are high house prices and low housing supply, which will certainly affect the flow of buying activity specifically.”

Freddie Mac predicts that home prices will rise 6.6 percent in 2021 and slow to 4.4 percent in 2022, while he expects home sales to reach 7.1 million in 2021 and 6 in 2022 , 7 million homes will fall. Purchase origins are projected to rise to $ 1.7 trillion in 2021 before falling to $ 1.6 trillion in 2022.

“The ramp-up previously forecast for the economy is underway, which is reflected, among other things, in increasing passenger reservations and restaurant bookings,” said Doug Duncan, senior vice president and chief economist of Fannie Mae. “Vaccinations continue to rise and consumers seem increasingly paying attention to life after the pandemic.

“As inflationary pressures mount, our latest forecast suggests that interest rates will remain stable at borrower-friendly levels in the short term. Despite the recent hikes, mortgage rates remain near historic lows that we expect will help maintain strong residential demand in 2021.

Doug Duncan | Photo credit: Fannie Mae

“The rate of changeover from tenants to first-time buyers continues, with many moving from denser urban areas to the suburbs,” Duncan said. “However, strong consumer demand for housing continues to meet lack of supply, limiting sales and propping up house prices. We expect this will further exacerbate affordability concerns in the months ahead as developers join in too Restrictions on the supply of input have to contend with. “

Fannie Mae’s real GDP growth expectations for full year 2021 improved to 6.8 percent, inclusive According to the company’s April 2021 report by the company’s economic and strategy research group, annualized growth was 9.1 percent for the second quarter, largely driven by continued easing of virus-related social restrictions and stimulus-related consumer spending comment.

Economic activity rebounded strongly after the weather-related retreat in February and the acceleration is expected to continue in the second quarter before tapering in the second half of the year.

Of course, last year’s pandemic throws uncertainty into the forecast, and Fannie Mae announced that the risks to the GDP growth portion of its forecast remained high.

The uncertainties surrounding the forecast include the level of willingness among consumers to tap into their accumulated savings and return to activities previously limited to COVID. This also includes known supply chain disruptions, the rate of inflation and monetary and fiscal policy uncertainties.

Email Kelsey Ramírez


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