Fannie Ups its 2021 Home Sales Forecast, Expects Decline in 2022
Written By: Joel Palmer, Op-Ed Writer
A late-year surge in home sales prompted Fannie Mae to increase its 2021 forecast for total year sales, but its economists expect a drop off in 2022.
In its December commentary, Fannie’s Economic and Strategic Research Group upgraded its home sales growth projection for 2021 to 7.1 percent from the previously projected 5.3 percent.
Fannie is also projecting a decline of 1.4 percent in 2022 due to limited listings and growing affordability constraints.
“While the economy picked up steam late in the year, unfortunately, so did inflation, and the market expects the Fed to recalibrate its monetary policy as a result,” said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist. “The public registered its ill-will toward inflation in our most recent National Housing Survey®, which found that 70 percent of consumers believe the economy to be on the wrong track – the most since 2011, when consumer sentiment was weighed down by the aftermath of the Great Recession.”
The end of 2021 has been mostly positive for mortgage lenders.
Existing home sales moved upward by 0.8 percent in October to an annualized pace of 6.34 million annualized units. Pending sales jumped 7.5 percent. Purchase mortgage applications have also trended up. Fannie said the strength may be due in part to some homebuyers anticipating higher mortgage rates and moving their plans forward to lock in lower rates.
“Together these indictors lead to a projection of stronger near-term sales than what we had previously expected,” Fannie said in the December commentary. “As such, we have made a large upward revision to our Q4 2021 and Q1 2022 existing sales forecasts, with smaller adjustments thereafter.”
Fannie now expect fourth-quarter existing sales to be 6.38 million annualized units, the fastest quarterly pace since the previous fourth quarter.
“We still believe this to be unsustainable as the flow of new listings remains well below the pace of sales, along with the likelihood that a lot of temporary demand drivers should moderate, but we were previously clearly off on the timing of this turn,” Fannie’s economists said.
Fannie revised its mortgage origination volume and now expects 2021 purchase volume to total $1.9 trillion, $13 billion higher than last month’s forecast. They expect volumes to grow 8 percent in 2022 to $2 trillion, a small upgrade from last month’s forecast.
Fannie is forecasting the 30-year mortgage rate to average 3.2 percent for 2022 and 3.5 percent for 2023. However, the uncertainty over the future path of monetary policy and how markets will respond to it leads to a wide range of plausible mortgage rate paths moving forward, Fannie’s report says.
Fannie expects 2021 refinance volume to be $2.6 trillion, $27 billion higher than last month’s forecast, driven both by somewhat lower expectation for interest rates as well as recent data on applications. Fannie also revised upward its 2022 forecast by $49 billion to $1.3 trillion, as the lower mortgage rate forecast boosts volume.
About the Author
As an NAMU® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.
