Residential Lending Volume Forecast 2019-2020: Refi & Purchase Lending Volumes & Interest Rates as of March 2019

One year ago the expectation was for rising interest rates and plunging refinance lending volumes.   Yet as of March 28, 2019, the 30-year conventional mortgage interest rate fell 22 basis points from the prior week to 4.06 percent according to Freddie Mac’s Weekly Primary Mortgage Market Survey.  The drop was the largest one-week decline seen in 10 years with rates now at the lowest measured since January 2018.

The following graph shows  the historical weekly interest rates since 2017.  Rates have fallen precipitously in the past three weeks as the Fed has announced a stable Fed Funds rate outlook.

The next table shows the latest forecast for 30-year conventional mortgage rates as of March 2019 as reported by Fannie Mae, Freddie Mac and the Mortgage Bankers Association.  None of these see rates exceeding 4.8 percent between now and 2021 on an annualized basis.

Total refinance lending volumes are expected to decline from an average $468.0 billion in 2018 to $446.0 billion in 2019 and down again to $413.3 billion in 2020.  The all-time record refinance lending volume was reached in 2003 at $2.598 trillion.   Forecast refinance lending this year will be the lowest level seen since 2000 which troughed at $124.5 billion.

Forecast purchase lending volumes are expected to rise, but not by a great amount.  Cooling existing home sales (which were down 5.5 percent year-to-date in the U.S. in the first two months of 2019) are being muted somewhat by an expected continuing rise in home values, resulting in a net gain in the total residential purchase lending volume for 2019 and 2020.  The average hourly income rate in the U.S. increased 3.4 percent in the past 12-months (the largest 12-month gain in more than 10 years) and 13.7 percent in the past five years while the median existing home price jumped 3.6 percent and 32.4 percent for the same time periods, respectively.  Purchase lending is forecast to increase 2.9 percent in 2019 and 4.5 percent in 2020.

Total residential lending volumes (purchase plus refi) are now expected to essentially remain unchanged from $1.63 trillion in 2018 to $1.64 trillion in 2019 and then post a minimal 1.3 percent gain in 2020.

The following graph shows historical and forecast total residential lending volumes reported by Fannie Mae along with 30-year conventional residential mortgage rates per Freddie Mac.

No doubt these will change as the year progresses. Stay tuned for periodic updates.

Ted

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