Housing forecasts and updates

Ellen Sinkey PHOTO CREDIT: Contributed

If you’re in the market to buy a new home, you might have been watching interest rates or housing inventory projections in addition to monitoring homes as they come on the market.

Housing market projections are just that — projections — meaning that economic changes and volatility can change these projections often — even from the prior month.

According to an article by HousingWire, months of sub-3% mortgages rates, ongoing housing market supply constraints, and a 300% increase in lumber prices during the past 15 months has prompted Fannie Mae’s Economic and Strategic (ESR) Group to revise several of its 2021 housing forecasts.

March’s existing home sales report perfectly illustrated the country’s core housing market issues — a decade of under-building which led to a 3.7% decline in transactions from the prior month, even though there has never been more demand for a home.

Since interest rates have fallen back below 3%, Fannie Mae revised its expectations for purchase and refinance volume. The economic group cut $43 billion from its 2021 purchase volume forecast. It estimates that purchase mortgages will hit $1.8 trillion by year end. Because record-low mortgage rates fueled the housing market’s refinance wave of 2020, Fannie Mae also revised its refinance origination volume to $2.2 trillion in 2021, an increase of $125 billion from last month’s forecast.

“We expect refinance volume in 2022 to total $1.1 trillion, an upward revision of $43 billion from last month’s forecast, but a decline of 49% from 2021,” said the ESR group. “At current interest rates, we estimate around 51% of all outstanding mortgages have at least a 50-basis point (0.5%) incentive to refinance, up from 42% in last month’s forecast (given the recent interest rate declines.)”

Will Larger Mortgages Be a Trend?

Increasing home prices mean a demand for larger mortgages, but those prices also might be causing a pullback in homebuying overall, according to CNBC.

Mortgage applications to purchase a home fell slightly during mid-May 2021. Volume was just 2% higher than the same week one year ago, when the housing market was just starting to come back after the pandemic shut it down.

“A decline in purchase applications was seen for both conventional and government loans,” said Joel Kan, an MBA economist. “There continues to be strong demand for buying a home, but persistent supply shortages are constraining purchase activity, and building material shortages and higher costs are making it more difficult to increase supply.” The extreme shortage has prices continuing to climb at the fastest pace in over 15 years, and as a result, average purchase loan balances are climbing in tandem. As of mid-May 2021, that average hit $411,400.

Investors are Buying Up Single-Family Homes Across the U.S.

According to HousingWire3,after three straight quarters of declines, home purchases by investors rose 2.7% year over year in the first quarter of 2021, marking the first period of growth since the COVID-19 pandemic began. With plans to take advantage of the hot housing market and a soaring stock market, investors bought about one of every seven U.S. homes in the first quarter — up from the prior year, which was one of every 10 homes.

“Investors are likely starting to feel more comfortable because the economy is in recovery mode,” said Sheharyar Bokhari, Redfin senior economist. “They also may be jumping back in because they see the intensifying shortage of homes for sale as an opportunity. With so few houses on the market, many families are resorting to rentals. Flush with cash, investors are able to snap up the homes that are available, and then turn around and rent them out to folks who can’t find a home or are priced out of homeownership.” In theory, the increased supply could make rentals more affordable; however, it’s making it tougher for first-time homebuyers to purchase a reasonably priced home.

After a run up over the first few months of the year, rates have paused and hovered at or under 3% since March. As mentioned previously, despite this favorable rate climate, there remains a shortage of homes for sale. The lack of housing supply has been intensified by labor disruptions and expensive building materials that are driving up the cost of new housing — making it difficult for homebuyers to find homes to purchase.

That being said, don’t get discouraged. New homes in the tri-state area are coming on the market daily, and you never know when the right one will come up. Make sure to have all your financial pieces in order, including a pre-approval letter from a local lender, so you have the option to make a quick offer when the right home comes up.

www.housingwire.com/articles/ fannie-mae-alters-its-2021-forecasts/

www.cnbc.com/2021/05/19/ homebuyers-are-applying-for-ever-bigger-mortgages- as-home-prices-soar.html

www.housingwire.com/articles/ investors-are-buying-up-single-family-homes-across- the-us/