Mortgage lenders should expect a small uptick in home purchases, while refi’s fall off the fiscal cliff. That’s the finding of the latest Freddie Mac’s latest Quarterly Forecast.
Housing demand is expected to remain high, with home sales forecast to reach 6.9 million in 2022, then 7 million in 2023.
“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.”
That’s a 55 percent plunge in refinancing.
On the overall economy, Freddie Mac predicts growth will slow in 2022 due to uncertainty and challenges surrounding the pandemic’s progression.
One serious factor is inflation, which soared to a 40-year high of 7% year-over-year in December 2021 and is expected to keep building in 2022.
“We expect the inflationary pressures to moderate this year as the Federal Reserve begins to taper its asset purchases and raise rates,” the report reads.
Freddie Mac predicts mortgage rates will average 3.6% in 2022 and 3.9% in 2023. Rates averaged around 3% in 2021, finishing the year at 3.1% in December.
The economy has continued to recover from the effects of the pandemic, but the work is far from over. While the unemployment rate hit 3.9% in December, the economy added only 199,000 nonfarm payroll jobs at the same time, far below expectations. Job openings remain elevated and nonfarm payrolls are down 3.6 million from February 2020.
Underbuilding has been public enemy number one to analysts and experts explaining the 2021 boom and housing affordability crisis.