Freddie Mac's Housing Forecast Rosy for 2020

By Taff Weinstein at

Freddie Mac's Housing Forecast Rosy for 2020

The housing market will hold steady this year, according to the Freddie Mac December Forecast. You can read their official report here.

Freddie Mac expects home sales to jump from 6 million in 2019 to 6.2 million in 2020 and to 6.3 million in 2021. Price growth will likely continue to decelerate through 2021, with projected annual growth rates of 2.8%, and 2.1% in 2020 and 2021, respectively.

Modest gains in home sales and house prices will spur purchase mortgage originations, according to the forecast. Purchase originations will climb to $1,333 billion in 2020, and finally edging up to $1,377 billion in 2021.

Meanwhile, Freddie anticipated refinance originations, estimated at $846 billion in 2019, to slow to $650 billion in 2020 and $475 billion in 2021

The average rate of the 30-year fixed-rate mortgage will hover at 3.8% in 2020 and 2021.

“A more accommodative monetary policy stance and robust labor market helped the US housing market regain its footing in 2019,” said Freddie Mac Chief Economist Sam Khater. “Improved sentiment, lower financial market volatility, and trade headwinds are setting up a favorable economic environment for continued real estate market growth in 2020.”

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.000 MBS) gained +33 basis point (BPS) from last Friday's close which caused fixed mortgage rates to move slightly lower compared to the prior week.

Overview: We had another holiday-shortened week.  The economic data was a mixed bag with very strong consumer and construction data but continued weakness in manufacturing.  The biggest movement was on Friday as long bonds rallied which pushed mortgage rates lower.  This was due entirely to investors putting money in the safe-haven of U.S. long bonds due to military escalation with Iran.

Manufacturing: The December ISM Manufacturing PMI was weaker than expected (47.2 vs est of 49.0) but the Prices Paid (a key measure of inflation) shot up to 51.7 vs est of 47.5. The December Chicago PMI improved from November's pace of 46.3 to 48.9 and just edged out estimates calling for a level of 48.0. But this marks the 4th month in a row with a reading below 50.0.

Construction Spending: The November data showed a MOM big pickup of 0.6% vs est of 0.3%, plus we see a huge revision to October from -0.8% to +0.1%

Jobs, Jobs, Jobs: The Challenger-Grey Job Cut Report showed a big drop in announced corporate layoffs from 44,569 in November down to 32,843 in December. Initial Weekly Jobless Claims came in at 222K vs est of 225K.  The more closely watched 4 week moving average increased to 233,250.

Consumer Confidence: The Conference Board's December survey came in at 126.5 vs est of 128.0 which is a nice gain from November's reading of 125.5
The Talking Fed: We got the Minutes from the last FOMC meeting at 2:00. You can read the official release here
There were no surprises or details that had not been expected.

The Talking Fed: We got the Minutes from the last FOMC meeting at 2:00. You can read the official release here. There were no surprises or details that had not been expected.

What to Watch Out For This Week:

The above are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages. I will be watching these reports closely for you and let you know if there are any big surprises.

It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets.  Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.


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