Fannie Mae’s Thoughts on Current Mortgage Rates

Fannie Mae Has Some Insights

Mortgage rates have been fluctuating consistently throughout 2022. Once you add in the tightening of monetary policies and a constant rise in inflation across the country, you have to wonder what impact these changes have on government-sponsored enterprises like Fannie Mae.

Let’s start with a quick update on mortgage rates. Today, 8/22/2022, the rate for a 30-year fixed-rate mortgage is 5.13%. We saw our highest rates of the year this past June, with the same 30-year mortgage hitting a rate of 5.81%. Yes, we have seen mortgage rates fall, but is that good news for the housing and mortgage industries? Time to dive in.

Fannie Mae’s Insights

Fannie Mae is a government-sponsored enterprise that backs a large amount of home loans in the U.S. At the beginning of 2022 Fannie Mae had an estimated total of $2.53 trillion originations – a number that they’ve recently reduced. After taking into account lower projections for home purchases and higher mortgage rates, the estimate for 2022 has been reduced to $2.47 trillion.

Here are some other key takeaways from Fannie Mae that you may find interesting:

• “Industrial production, a gauge of output in the manufacturing, utility, and mining sector, rose 0.6 percent in July.

• Existing home sales declined 5.9 percent in July to a seasonally adjusted annualized rate (SAAR) of 4.81 million, the lowest level since April 2014.

• Housing starts fell 9.6 percent in July to a SAAR of 1.45 million, the lowest level since February 2021, according to the Census Bureau.

• The National Association of Home Builders/Wells Fargo Housing Market Index dropped 6 points in August to 49, the first time the survey dipped below 50 since the onset of the pandemic.”

The ESR Group’s Predictions

Fannie Mae has an Economic and Strategic Research Group (ESR) made up of expert economists, analysts, and strategists. They research the major aspects of the housing industry and the economy, and they regularly publish their findings.

The ESR Group expects, “total home sales to decrease 16.2 percent in 2022. This decline represents a further downward revision from last month’s forecast of a 15.6 percent drop, as recent incoming data point to a faster slowdown in near-erm sales than previously expected, despite mortgage rates having moved lower over the last few months. The latest forecast also projects total mortgage origination activity at $2.47 trillion in 2022, down from $4.47 trillion in 2021, and then a further reduced $2.29 trillion in 2023.”

Fannie Mae Senior Vice President and Chief Economist Doug Duncan had some input, saying, “ Housing remains clearly on the downtrend – and has been for several months now – due to the combined effects of outsized home price increases and the significant and rapid run-up in mortgage rates. The question for many market observers is how quickly, and with how much additional tightening, the core inflation rate will come down to the Fed’s preferred target. In our view, the labor market’s continued strength suggests that the Fed is likely to maintain its aggressive posture through the end of the year.”

Although the housing and mortgage industries have continued to maintain their “hot” status, there is possible relief coming in the upcoming months. We look forward to a slowing housing market, a decrease in inflation, and possible mortgage rate plateaus.