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Fannie Mae recently took a look at housing market growth and made a few predictions for how the rest of 2022 going into 2023 will unfold, let’s take a look…

At the time of the analysis, mortgage rates were down 59 basis points, which brought the percent of income an average homeowner is spending on their mortgage down from the summers peak of 29.3 percent, to 28.7 percent. Mortgage rates had risen around 235 basis points from 2021 and at the same time prices appreciated on an annual basis by 19.4 percent. With this fresh insight, Fannie Mae has updated their forecast to the following:

  • Existing home sales prediction has been adjusted to an estimated 5.14 million for 2022
  • New home sales prediction has been adjusted to an estimated 632,000 units

Fannie Mae estimates 84 percent of current outstanding mortgages are a minimum of 100 basis points lower than current market rates, heavily contributing to the continued decline in sales. Most homeowners aren’t in a rush to sell their homes when purchasing a new one in today’s market means a drastic increase in their monthly payments because of the steep mortgage rates.

For now, the forecast remains a steady slowdown in the current market. Fannie Mae Senior Vice President and Chief Economist Doug Duncan was quoted saying, “…Likewise, lower interest rates at the longer end of the yield curve should be supportive of the economy through the end of 2022, which is why we’re forecasting modest economic growth in the second half. However, we maintain the view that a modest recession is likely to emerge in the new year as the labor market softens and the effects of tighter monetary policy are more acutely felt.”

Duncan continued to say, “Housing remains clearly on the downtrend – and has been for several months now – due to the combined effects of outsized home price increases and the significant and rapid run-up in mortgage rates. The question for many market observers is how quickly, and with how much additional tightening, the core inflation rate will come down to the Fed’s preferred target. In our view, the labor market’s continued strength suggests that the Fed is likely to maintain its aggressive posture through the end of the year.”

Mortgage Origination Projections

  • Fannie Mae has also revised their total mortgage origination forecast for 2022 to $2.47 trillion and $2.29 trillion in 2023
  • For purchase originations, $1.7 trillion for 2022 and (similarly) just under $1.7 trillion for 2023
  • Refinances are expected to total $769 billion in 2022 and $592 for 2023

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