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

Interest rates rose each and every week in the past four weeks according to the Primary Mortgage Market Survey from Freddie Mac, with the 30-year, fixed-rate conventional loan hitting 4.20 percent the week ending April 25, 2019.   Rates, however, were still 38 basis points less than 1 year ago when the conventional loan was at 4.58 percent.

The following graph shows  the historical weekly interest rates since 2016.

The next table shows the latest forecast for 30-year conventional mortgage rates as of April 2019 as reported by Fannie Mae, Freddie Mac and the Mortgage Bankers Association.  None see residential mortgage rates exceeding 4.6 percent between now and 2021 on an annualized basis.  The average 30-year rate has averaged 4.93 percent weekly since 1998, peaked at 8.64 percent the seven days ending May 18, 2000 and bottomed at 3.31 percent the seven days ending November 21, 2012.

Total refinance lending volumes are expected to decline from an average $468.0 billion in 2018 to $482.3.0 billion in 2019 and down again to $430.3 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 seen since the $124.5 billion volume in 2000.

Forecast purchase lending volumes are expected to rise, but not by a great amount.  Cooling existing home sales (which were down 6.6 percent year-to-date in the U.S. in the first three 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 3.2 percent in the past 12-months on a seasonally adjusted basis (the second largest 12-month gain in more than 10 years) and 13.8 percent in the past five years while median existing home prices jumped 4.1 percent and 30.1 percent for the same time periods, respectively, on a 12-month moving average basis.  Purchase lending is forecast to increase 2.8 percent in 2019 and 4.6 percent in 2020.

Total residential lending volumes (purchase plus refi) are now expected to rise 2.9 percent from $1.63 trillion in 2018 to $1.68 trillion in 2019 and then remain flat 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.

Freddie is forecasting an average 4.30 percent for 2019 rising slightly to 4.475 percent in 2020.

From a long-term perspective, interest rates remain comparably low, but home price gains have overwhelmed a slower-growing average hourly wage.   Affordability is key today when examining housing sales volumes.


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