As we economists say, “forecasting is difficult, especially the future.” Fortunately, Fannie Mae, Freddie Mac and the MBA update their quarterly and annual forecasts monthly for residential lending volumes – both refinance and purchase transactions.
The forecasts typically span a three-year period, currently from 2017 to 2019. While the MBA is the sole forecaster of 2020 residential lending volumes, they do not breakout quarterly estimates.
Key driver of these forecasts are the latest expectations of the 30-year residential conventional fixed-rate loan interest rates. The following table shows the current forecasts.
Refinance lending volume expectation is most volatile going forward when compared to purchase lending, with an average decline of 30.0 percent in 2018 versus 2017, and an additional 9.7 percent drop in 2019 from the prior year. Total refinance lending volumes are expected to decline from an average $665.1 billion in 2017 to $458.4 billion in 2018 – all driven by rising interest rates.
The duo of rising home prices and an increase in the number of sales (despite tight inventories) sees residential purchase lending volumes expanding from the prior year in both 2018 and 2019. The consensus for purchase lending volumes are shown in the next table. Purchase lending is expected to rise 6.0 percent and 6.2 percent in 2018 and 2019, respectively.
Total residential lending volumes (purchase plus refi) are now expected to drop from $1.80 trillion in 2017 to $1.67 trillion in 2018 – the decline all fueled by plunging refis.
Despite declining refinance volumes due to rising interest rates, overall home sales and prices are expected to continue to increase in both 2018 and 2019 based on current forecasts from Fannie Mae-Freddie Mac-MBA.