Fannie Mae Cuts Home Sales And Predicts Mortgage Purchases In June Report

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Fannie Mae significantly lowered its second and third quarter home sales estimates as supply factors, such as the low supply for existing homes and restrictions on new construction, run counter to demand.

These trends also affect inflationary impact housing is likely to have an impact on the US economy.

In the June forecast of the state-funded enterprise, home sales are expected to grow year over year at 6.6 million units in the second quarter and 6.5 million in the third quarter, compared to the same period last year. Forecast for May 6.9 million and 6.7 million, respectively.

Fannie Mae predicts annual home sales for the full year will be 6.7 million, up 4.2% from 6.5 million in 2020. But in May, Fannie Mae predicted 6.9 million units in 2021, up 6.3% from the previous year.

“Demographics remain favorable for a strong housing market and many of the supply constraints faced by home builders are likely to persist in the near future, so these upward price pressures are unlikely to be as temporary as many of the current inflation drivers.” – Fannie Mae Chief Economist Doug Duncan announced this in a press release.

On the other hand, in past cycles, housing has been a medium-term hedge of inflation. “If interest rates rise to reflect the rise in inflation based on the expectation of a tighter monetary policy in the future, home sales are likely to fall along with rise in price of a house, “Duncan continued.

While housing additions are expected to continue at the fastest pace since 2013, Duncan now projects 1.62 million housing units for 2021, up 17.2% from the same period last year; In May, he predicted that 1.65 million units would be built, up 19.3% from 2020.

Building permits for single-family homes fell a modest 0.32% in May from April, according to a separate BuildFax report. Compared to May 2020, affected by the pandemic, there was an increase of 25.88% over the same period last year, while the interim three-month forecast (March to May 2021) increased by 19.70% over the previous year. year.

However, a shortage of building material is likely to disrupt the volume of initial construction, which usually lags behind the issuance of permits. “Lumber prices seem to be limiting home construction at a time when accelerating the pace of construction is imperative to bring potential buyers and sellers back to market,” said Jonathan Canarek, managing director of BuildFax.

But in a separate commentary on today’s Census Bureau data on the beginning of housing construction which came after Fannie Mae’s forecast, Duncan said, “with lumber prices falling in recent weeks and a significant lag in sales of homes that have not yet started, we expect some growth in the number of single-family homes in the coming months as they are delayed. and the deferred projects started. “

As a result, in a June report, Duncan cut his 2021 procurement forecast to $ 1.81 trillion from $ 1.84 trillion in May. This included a decrease in the forecast for the second quarter to $ 489 billion from $ 500 billion, the forecast for the third quarter to $ 489 billion from $ 513 billion and the forecast for the fourth quarter to $ 458 billion from $ 461 billion. However, its overall projection for origins has risen to $ 4.1 trillion from the previous $ 4.08 trillion as refinancing is now expected to be higher than previously forecast in each of the remaining three quarters of this year.

Fannie Mae predicts that petroleum product production will be just $ 2.3 trillion this year, up from $ 2.24 trillion a month ago. Fixed mortgage rates for 30 years must stay at 3% in the second and third quarters, and by the end of the year will grow to 3.2%.



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