Annual mortgage originations are likely to top $4.1 trillion for the first time ever, as there will be more refinancings this year than total loans produced in 2019, Fannie Mae said.

Fannie Mae’s latest forecast calls for $2.6 trillion in refinance originations in 2020, along with $1.5 trillion in purchase volume. Last year, originations totaled $2.46 trillion, with $1.3 trillion coming from home purchase activity and $1.1 trillion from refis.

The previous best year on record was in 2003, with total volume of $3.7 trillion, according to Fannie Mae’s data.

But 2020 will not be a record year for either refis or purchases, although it will come close in both categories. There were $2.7 trillion of refis in 2003, while 2005 was the best year for purchases at $1.51 trillion.

In its September forecast, Fannie Mae predicted $3.87 trillion of total volume for the year, with $2.4 trillion in refis and $1.4 trillion in purchase volume.

Earlier this week, Freddie Mac predicted $3.6 trillion in volume for 2020. The Mortgage Bankers Association will release its October forecast at its convention next week. Its September forecast was more conservative than Fannie Mae’s, calling for $3.14 trillion this year.

A portion of 2020’s predicted refinance activity has been moved up from 2021, so Fannie Mae cut its refi forecast for next year by $20 billion to $1.058 trillion.

But it raised the overall forecast for 2021 to $2.62 trillion from $2.57 trillion on increased strength in the purchase market, even as the inventory shortage is expected to continue.

Fannie Mae did raise its mortgage rate forecast for next year slightly, calling for an average of 2.8% for the 30-year fixed loan; last month it predicted a 2.7% rate by the end of 2021.

“Housing continues its multi-year theme of historic supply constraints,” Fannie Mae Chief Economist Doug Duncan said in a press release. “Strong demand-side drivers, including low mortgage rates and a surge of millennials looking to purchase homes, are contributing to significant home price appreciation, particularly as many older homeowners continue to age in place and other would-be home-sellers adopt a more conservative posture due to COVID-19 concerns, further limiting supply.”

If anything, current homeowners are playing a game of “housing musical chairs” by selling their properties to each other, which is affecting the market dynamics, Mark Fleming, chief economist for First American Financial, said in the company’s September Potential Home Sales Model press release.

“Rapid house price appreciation and its impacts on existing and first-time homebuyers will persist until the supply and demand imbalance begins to improve,” Fleming said. “In the game of housing musical chairs, it’s clear the housing market needs more chairs.”





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