Freddie Mac again increased its origination forecast for the next two years, as the rate drops of the past few months are expected to boost refinance volume.
“We expect single-family mortgage originations to increase 2.6% to $1.69 trillion in 2019 and remain around that level in 2020,” said Freddie Mac Chief Economist Sam Khater in a press release. “With mortgage rates easing up since the end of 2018, we revised up our forecast of the refinance share of originations to 27% and 24% in 2019 and 2020, respectively.”
In January, Freddie Mac forecast $1.681 trillion for this year and $1.679 trillion for 2020. The latest outlook raised the 2020 projection to $1.68 trillion.
Refinancings are expected to total $455 billion in 2019, compared with the prior projection of $450 billion. The expected purchase volume is now $1.234 trillion, up from $1.231 trillion in the January outlook.
Freddie Mac did not revise its 2018 estimate of $1.646 trillion of total volume, with $1.156 trillion coming from purchases.
For 2020, Freddie Mac projects $1.28 trillion of purchase volume, a slight decline from its January forecast, and $400 billion of refinancings, a slight increase.
It revised its mortgage rate forecast for 2019 downward to 4.6% in the second quarter and 4.7% in the third and fourth quarters. It previously called for rates to average 4.8% for the last nine months of the year.
Conventional mortgages should make up $1.313 trillion of production; in January, Freddie Mac projected $1.289 trillion. Government loans will be $376 billion, compared with the prior projection of $392 billion.
Housing starts will increase to 1.29 million units in 2019 and to 1.36 million units in 2020. “While this is well below what we think the economy needs to match long-run demand, a lack of labor and other factors will constrain the recovery in housing construction,” Khater said in the forecast report.