Home purchase applications have begun to rebound from April lows, reaching the second highest weekly level of the year in mid-June, Freddie Mac said yesterday in its quarterly forecast. “Heading into the summer, the housing market is clearly rebounding faster than expected with a recovery in purchase demand and muted home price response due to the economic downturn,” the GSE said. “However, the future is much more uncertain than usual.”
The GSE said it expects 30-year fixed-rate mortgage rates to remain low, averaging 3.4% in 2020 and 3.2% in 2021. Home sales are expected to fall to 4.8 million in 2020 before rebounding to 5.6 million in 2021, remaining well below the 2019 level of 6 million.
Freddie Mac also noted a strong uptick in refinances as rates fell precipitously in the beginning of 2020. “As mortgage rates hold steady at all-time lows, we will likely see refinance originations stay at high levels for the full year,” the forecast noted. “We expect refinance originations to reach $1.9 trillion in 2020 and then decline to $1.3 trillion in 2021. Purchase originations are expected to decline due to the drop in home sales and reach $1 trillion in 2020, and then we expect the purchase market to rise to $1.2 trillion in 2021.”