Mortgage originations are expected to top $2 trillion in 2016, the first time that has occurred in four years, according to a new report by Freddie Mac.
Freddie Mac’s monthly outlook for August shows low mortgage interest rates are driving a burst of refinance activity, and strong home sales and housing price growth are supporting purchase mortgage activity.
“At the current pace, we’re likely to see the mortgage market top $2 trillion in originations for the first time since 2012,” Freddie Mac Chief Economist Sean Becketti said in a news release about the report. “And unlike in 2012, when the market was driven largely by refinances, today’s market is more balanced between home refinances and purchases: nearly 50-50. This is good news for home sales as we’re likely to see the best year in home sales in a decade. This is a good sign for the housing market as it continues to be an even brighter spot in the economy.”
Low mortgage interest rates and strong home sales are expected to boost 2016 forecasted mortgage originations by $175 billion over July’s forecast, according to the release. Freddie Mac forecasts total home sales to reach 6.04 million in 2016, the highest level in a decade.
Interest rates are expected to remain below 4% in 2016 and 2017, according to the release.
Becketti noted, however, that the housing market still has challenges. New housing construction is expected to continue to grow, but at a slower pace than previously expected. Freddie Mac revised downward its housing starts forecast to 1.2 million for 2016 and 1.4 million for 2017.
“Low levels of inventory across many markets will continue to put upward pressure on house prices for the foreseeable future.” Becketti added in the release.
Freddie Mac also revised downward its GDP growth forecast for 2016 and 2017.
“Overall, we expect GDP growth to bounce back to just over 2% for the remainder of 2016 as inventory investment rebounds and the drag by energy prices begins to ease and push nonresidential investment up,” the report stated. “However, recent global uncertainty and its effects on domestic production have led us to reduce our forecast for GDP growth in 2017 by 30 basis points to 1.9%”
For more information about Freddie Mac’s August outlook, see http://freddiemac.mwnewsroom.com/press-releases/freddie-mac-august-2016-outlook-otcqb-fmcc-1273085.