Fixed Assets

Housing To Remain Stable As Rates Rise And Prices Cool

Simmering economy will spur moderation

In its Quarterly Forecast, federal mortgage-aggregator Freddie Mac forecasts less demand, lower pricing. Visit freddiemac.com to access the full report.

MCLEAN, Va., Jan. 21, 2022 (GLOBE NEWSWIRE) — Freddie Mac (OTCQB: FMCC) today predicted that the single-family housing market will remain stable in 2022 even as mortgage rates are expected to increase. A new Quarterly Forecast released by the company’s Chief Economist estimates that rising rates will lead to moderation in homebuyer demand, slowing house price growth somewhat.

“As mortgage rates rise, we do expect some moderation in housing demand, causing house price growth to temper. However, the combination of a large number of entry-level homebuyers facing a shortage of entry-level inventory of homes for sale should keep the housing market competitive,” said Sam Khater, Freddie Mac’s Chief Economist. “In 2022, we expect purchase originations to grow from $1.9 trillion in 2021 to $2.1 trillion in 2022 while refinance activity is anticipated to decrease from $2.7 trillion in 2021 to $1.2 trillion in 2022.”

Specific findings include:

  • The average 30-year fixed-rate mortgage (FRM) is expected to be 3.6 percent in 2022 and 3.9 percent in 2023. In 2021, the 30-year FRM averaged 3.0 percent.
  • House price growth is expected to be 6.2 percent in 2022, slowing to 2.5 percent in 2023. House price growth was 15.9 percent in 2021.
  • Home sales are expected to be 6.9 million in 2022, increasing to 7.0 million in 2023. Home sales were 6.9 million in 2021.
  • Home purchase mortgage originations are expected to increase from 1.9 trillion in 2021 to $2.1 trillion in 2022 and $2.2 trillion in 2023.
  • Refinance originations are expected to continue to soften, declining from $2.7 trillion in 2021 to $1.2 trillion in 2022 and $930 billion in 2023.
  • Overall, annual mortgage origination levels are expected to be $3.3 trillion in 2022 and $3.1 trillion 2023, down from $4.7 trillion in 2021.

Excerpts from the Quarterly Report

As the U.S. economy ended 2021 on firm ground, economic growth is expected to be slower in 2022 amid uncertainty and challenges resulting from the ongoing health crisis.

The labor market has continued to recover from the effects of the pandemic, with the unemployment rate reaching 3.9% in December 2021. However, the U.S. economy added only 199,000 non-farm payroll jobs in December 2021, which was below expectations. To date, job openings remain high at 10.6 million, non-farm payrolls are down 3.6 million from the pre-pandemic levels (February 2020) showing there is still room for improvement in employment.

As mortgage rates rise, we do expect some moderation in housing demand, causing house price growth to temper...

Inflationary pressures continue to build as consumer price inflation (CPI) surged in 2021. The all-item CPI hit a 40-year high of 7.0% year-over-year in December 2021, while the core CPI came in at 5.5% year-over-year. We expect the inflationary pressures to moderate this year as the Federal Reserve begins to taper its asset purchases and raise rates. Mortgage rates hovered around the 3% mark in 2021, coming in at 3.1% in December 2021. We forecast rates to average 3.6% in 2022 and 3.9% in 2023.

The demand for housing continues to remain stable, mainly due to low mortgage rates coupled with first-time homebuyers and other demographic tailwinds helping to support stability in the housing market this year. Home sales were strong in 2021, with fourth quarter home sales expected to come in at 7.1 million. We forecast home sales to hit 6.9 million in 2022 and increase to 7.0 million in 2023. Given the expected increase in mortgage rates, we expect some moderation in housing demand, and we forecast house price growth to decrease from 15.9% in 2021 to 6.2% in 2022 and to cool further to 2.5% in 2023.

Based on current demand and continued (though moderating) house price growth, we expect home purchase mortgage originations to grow from $1.9 trillion in 2021 to $2.1 trillion in 2022 and $2.2 trillion in 2023. With a higher mortgage rate forecast for 2022 and 2023, we anticipate refinance activity to slow, declining from $2.7 trillion in 2021 to $1.2 trillion in 2022 and $930 billion in 2023. Overall, we forecast total originations to decline from the high of $4.7 trillion in 2021 to $3.3 trillion in 2022 to $3.1 trillion in 2023.

 

 

 

Freddie Mac makes home possible for millions of families and individuals by providing mortgage capital to lenders. Since our creation by Congress in 1970, we’ve made housing more accessible and affordable for homebuyers and renters in communities nationwide. We are building a better housing finance system for homebuyers, renters, lenders, investors, and taxpayers. Learn more at FreddieMac.com, Twitter @FreddieMac, and Freddie Mac’s blog FreddieMac.com/blog.