Published on April 15, 2021
Written by The Servion Group
In its March 2021 report, Fannie Mae said home sales are "likely to be minimally affected by rising mortgage rates," though it did acknowledge that a large jump is a risk. Amazingly, Fannie expects the purchase market to do even better in 2021 than it did last year; they predict purchase mortgage originations to rise from $1.6 trillion in 2020 to $1.8 trillion in 2021.
Considering 2020’s origination volume was a new record, the idea of breaking that record again in 2021 may seem fantastical, but that’s what the data indicate.
Housing Activity Projections Assume Several Things
According to Mike Frantoni, the MBA’s chief economist, the 2021 market forecast assumes the following:
In a press release Frantoni said, “The economy, labor market, and housing market have all seen meaningful rebounds since the onset of the pandemic, but there is still profound uncertainty." Overall, the second half of the year should see "continued purchase growth and slowing refinance activity," Frantoni concluded.
Offsetting the good news in the purchase market is an expected cool down in refinance activity. Fannie’s March release predicts refis will drop from 2020’s record high $2.8 trillion to $2.1 trillion in 2021, a decline of more than 20 percent. This is not surprising given that refinance originations are far more rate-sensitive and rates have moved up from last year's record lows.
Despite recent rate increases, Fannie’s research group believes that as of mid-March, 48 percent of all outstanding mortgages currently have at least a half-percentage point incentive to refinance. But they also expect a “modest rise in interest rates” to slowly decrease the number of homeowners who could benefit from refinancing.
We grew our total number of employees by over 40 percent in 2020 and are well positioned to help you meet what appears to be a summer of high demand for mortgage solutions. We look forward to working with for many years to come!