Originations could top $2T three years in a row: Fannie Mae

For the first time since the start of the housing crisis, mortgage origination volume could top $2 trillion for three consecutive years, according to Fannie Mae.

The increased forecast compared with January was based on how consumers are supporting the nation's economy even in the face of negative headlines.

"The U.S. economy's resilience, rooted in labor market strength and improved household balance sheets, was on display in January amid greater market uncertainty, including Boeing's production schedule and the effect of the coronavirus on the global economy," Doug Duncan, Fannie Mae's senior vice president and chief economist, said in a press release. "Looking ahead, we continue to anticipate that the economy's resilience will help keep housing on a firm growth track."

"In fact, our updated housing market forecast shows greater strength in essentially every part of the housing market extending through the first half of 2021. The limiting factor for home sales, as well as the primary driver of home price appreciation, remains the supply shortage. Barring an uptick in the inventory of existing homes put on the market, in the near term we're forecasting relatively flat home sales until higher construction activity can be sustained, which we foresee will be the case later this year."

In January, low rates drove Fannie Mae's Home Purchase Sentiment Index to a level near the all-time high, the company previously reported.

Fannie Mae raised its 2019 volume figure to $2.32 trillion from January's estimate of $2.18 trillion, with $729 billion of that coming in the fourth quarter, the best three-month period of the year.

In last year's fourth quarter, refinancings made up 54% of the volume and Duncan projects those will grow to 59% in the first quarter, before falling to 37% in the second quarter and 29% for the final two quarters.

For this year, Fannie Mae now predicts $2.28 trillion, compared with $2.06 trillion in the January forecast. But for the first time, Fannie Mae is calling for 2021 mortgage originations to be slightly above the $2 trillion mark; it previously forecast $1.97 trillion.

Refinancings now are expected to make up $895 billion of 2020 production; one month ago, Fannie Mae expected $690 billion.

If that came to pass, it would be the first three-year period where originations topped $2 trillion since the end of 2007, which capped off a seven-year run where volume topped that level.

Duncan raised his gross domestic product outlook to 2.2% for this year and 2.1% for next.

Low mortgage rates and strong demand should help grow residential fixed investment at a 3.9% annualized pace in 2020, following last year's contraction of 0.1%, Fannie Mae said. That demand is should more than meet the expected moderate uptick in inventory predicted for the latter part of the year.