The FNMA (Fannie Mae), one of the largest mortgage agencies in the country, has released its expectations for the mortgage market in 2022. They suggest a decrease in the volume of granted mortgage loans to $2.6 trillion. Home sales will drop to 5,960,000 units throughout the country. This change to previous forecasts was made based on both rising inflation and the recent increase in the key rate in May and June.
Back in May, Fannie Mae gave a rather negative outlook for the sector. It was expected that mortgage initiations would drop to $2.7 trillion in 2022 and to $2.25 trillion in 2023. Even earlier, in April, a decline to $2.8 trillion and $2.41 trillion was predicted, respectively. So, in three months, we have seen three downturns in economic expectations for the market in a row.
However, this year, the forecast for refinancing initiation volumes remains at the same level of $797 billion. As predicted in May 2022, FNMA believes that with the current interest rate on the 30-year fixed-rate loan at 5.23 basis points, only 2% of outstanding loans have an incentive for refinancing at a level of at least 50 basis points.
In 2023, according to Fannie Mae, the volume of refinancing initiations should grow by $24 billion, or 4.8% of the total initiated loans. The mortgage market is expected to stabilize next year.
The agency once again points out that the main limiting factor for the mortgage sector and the real estate market is the increasing key rate. It is expected that, by the end of 2022, the total number of residential property sales should decrease by 13.5% to 5.96 million units in the country. In 2023, 5.29 million housing units are expected to be sold.
Fears of a possible recession, declining affordable homes, and rising unemployment also intensify negative trends in the markets. These trends will not just pass by the largest and hottest markets, such as Florida. The real estate rental sector is expected to grow.
Another April statistics show the state of the market. From March to April, sales of ready-made real estate dropped by 2.4% to 5.61 million units in the country. At the same time, sales of new houses decreased by 16.6% to 591,000 units.
In general, with regard to the country's economy, Frannie expects GDP growth of 1.2% in the current year. In May, an increase of 1.3% was expected. At the end of the second quarter of this year, GDP growth should reach 2.5%. The following months will show a significant slowdown in economic growth.