With housing markets taking a hard hit from the coronavirus-induced shutdown, both borrowers and lenders can expect a not-so-typical spring homebuying season, according to Freddie Mac.
For the past few weeks, mortgage rates have reached record-low levels. Freddie expects the 30-year fixed-rate mortgage to average 3.3% in 2020 and 3.1% in 2021.
Overall annual mortgage origination levels will hover at $2.4 trillion in 2020 and 2021, with refinance originations coming in at $1,260 billion and purchase originations to drop to $1,091 billion in 2020, Freddie Mac predicted. In 2021, refinance originations are expected to slow down to $1,032 billion, while purchase originations would jump to $1,338 billion.
“Undoubtedly, the housing market is facing its greatest challenge in over a decade as our nation weathers this unprecedented economic event,” said Freddie Mac Chief Economist Sam Khater. “Although the uncertainty of the crisis means forecasts of economic activity are more unclear than usual, we expect that most of the economic damage from the virus will be contained to the first half of the year."
US home prices, which have shown steady growth in February, will decelerate to an annual rate of 0.4% in 2020 before rising to 0.7% in 2021.
Pending home sales were also rising at a stable, month-over-month pace of 2.4% before the outbreak, according to the National Association of Realtors. But the forecast anticipates home sales to fall to 5.1 million homes this year before recovering to 6.1 million homes next year.
"Going forward, we should see a recovery starting in the second half of 2020, though it will take some time for the economy to fully bounce back," Khater said.