With mortgage originations expected to surge in the third quarter, Freddie Mac forecasts that housing market is on track for its best year since 2006.
“The housing market remains a bright spot for the U.S. economy, with solid job gains and low mortgage interest rates sustaining the economy’s momentum in September,” Sean Becketti, chief economist for Freddie Mac, said in a news release about its September 2016 monthly outlook. “In most markets, low mortgage rates have more than offset the rise in house prices, preserving homebuyer affordability for the typical household. Homeowners are also taking advantage of low rates and house price appreciation that is increasing their home equity. The share of cash-out refinances grew to 41% in the second quarter of 2016, compared to 38% in the first quarter and 15 to 20% during the housing crisis.
“Mortgage originations are expected to surge in the third quarter, reflecting the impact of Brexit in recent mortgage activity,” Becketti added in the release. “We continue to believe that originations will reach $2 trillion this year, the highest since 2012.”
According to the release, other highlights of Freddie Mac’s September housing outlook include:
• A 30-year fixed rate mortgage is expected to average 3.6% in 2016, the lowest annual average in more than 40 years.
• Mortgage rates, which were 4% at the end of 2015, are projected to fall to about 3.5% in the third quarter of 2016. The drop in rates is expected to more than offset the rise in house prices in most markets, helping to preserve home buyer affordability.
• Home price appreciation is projected to increase to 5.6% in 2016 and 4.7% in 2017.
• Cash-out refinance activity rose in the second quarter, with an estimated $13.3 billion net dollars of home equity converted to cash during refinancing, up from $11.4 billion in the first quarter of 2016.
To read more about Freddie Mac’s September outlook, see http://freddiemac.mwnewsroom.com/press-releases/freddie-mac-september-2016-outlook-otcqb-fmcc-1277835.
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