Fannie Mae looks on the good side.
Thanks to a boom in refinancing – and confidence that Washington will provide further fiscal stimulus – the state-sponsored mortgage lender expects 2020 to be the best year for mortgage creation since 2003.
"We believe that housing construction will continue to be a relatively strong sector in the broader downturn as long-term supply constraints exacerbate demographic and demand-side factors that support house price growth," said Doug Duncan, senior vice president of Fannie Mae chief economist in recent comment.
Fannie's Economic and Strategic Resource (ESR) Group revised their expectations for home sales and mortgage origination in 2020 and 2021 for a total of $ 3.4 trillion in 2020.
Due to low interest rates, single-family home refinancing skyrocketed from $ 502 billion (non-seasonally adjusted) in the first quarter to $ 827 billion in the second quarter. While that number is projected to decline to $ 449 billion in the third quarter, an expected surge in origins in new home sales from $ 317 billion in the second quarter to $ 413 billion in the third quarter should catch up with the lull. ESR predicts total single-family home purchases of $ 1.332 trillion in 2020, slightly more than last year ($ 1.326 trillion).
Home sales have soared on pent-up demand after purchases were delayed in the spring. Moving can also be a factor. ESR sees "some early signs that buyer preference is shifting to lower density areas, potentially leading to additional buying activity."
All of this leads to a bright outlook for the next 16 months, although this is based on certain assumptions. On the one hand, the 30-year fixed interest rates will continue to fall from their historic low of around 3 percent to 2.7 percent by the end of 2021. ESR's base case scenario also assumes that Congress and the President will agree on additional fiscal stimulus.More coronavirus flares will only pause economic growth, not a contraction.
"The economic recovery after the sudden and severe setback of the second quarter is well underway, but we believe that the future pace will largely be determined by the path of the novel coronavirus and the public's response to coronavirus-related information," said Duncan .