Orig­i­na­tions to Ben­e­fit from Fewer Cash Sales

National Mortgage News - - Origination - By Brad Finkel­stein

A de­clin­ing share of cash home sales will drive pur­chase home orig­i­na­tions higher than pre­vi­ously ex­pected through 2019, ac­cord­ing to Fan­nie Mae.

The govern­ment-spon­sored enterprise’s June fore­cast for 2018 and 2019 raised to­tal vol­ume for each year to $1.71 tril­lion in its lat­est eco­nomic out­look. In May, Fan­nie Mae had pro­jected vol­ume of $1.67 tril­lion for each year.

The ex­pected drop in cash sales is ac­com­pa­nied by a cut in its fore­cast for ex­ist­ing home sales this year. Fan­nie Mae now ex­pects a 2% year-over-year in­crease in to­tal home sales, com­pared with ex­pec­ta­tions of a 2.5% in­crease in May. It cut the fore­cast for ex­ist­ing home sales to a 0.8% year-over-year gain from May’s 1.5% pro­jec­tion.

“As the Fed­eral Re­serve con­tem­plates ad­di­tional rate hikes this year and next, and the United States moves be­yond the heated rhetoric of pro­tec­tion­ism and to­ward the ac­tual ap­pli­ca­tion of tar­iffs, the down­side risks be­come more pro­nounced. Lean hous­ing in­ven­tory, a strong la­bor mar­ket and pos­i­tive de­mo­graph­ics bode well for sin­gle-fam­ily home­build­ing,” said Fan­nie Mae Chief Econ­o­mist Doug Dun­can in a press re­lease.

“But builders con­tinue to face head­winds from ris­ing costs, which, along with ris­ing in­ter­est rates, are also contributing to af­ford­abil­ity con­cerns.”

Fan­nie Mae also cut the pro­jec­tions for new home sales, to an 11.2% yearover-year gain in June from 11.9% in the prior month.

While the Fed­eral Re­serve said it now ex­pects to make four hikes of short-term in­ter­est rates in 2018, Dun­can still only ex­pects one more hike this year go­ing for­ward, but there is an in­creased pos­si­bil­ity that the sec­ond rate hike will oc­cur.

Mort­gage rates should re­main flat through the end of 2019, at 4.6%; in May Fan­nie Mae ex­pected rates to rise to 4.7% by the end of next year.

Fan­nie Mae in­creased its pur­chase vol­ume ex­pec­ta­tions in June in all four quar­ters of 2018 and 2019. It now projects $ 1.23 tril­lion in pur­chase vol­ume for 2018, com­pared with $ 1.19 tril­lion in the May fore­cast.

There was $1.18 tril­lion of pur­chase vol­ume in 2017.

Pur­chase vol­ume in 2019 is ex­pected to top $1.27 tril­lion in June’s fore­cast ver­sus a pro­jec­tion of $1.23 tril­lion in May.

The re­fi­nance orig­i­na­tion pro­jec­tion for the next two years was un­changed, although Fan­nie Mae did re­al­lo­cate vol­ume for the first three quar­ters of 2018.

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