Fannie Maes Mortgage origination Forecast

PLUS: How home prices are expected to shift

January 23, 2023

GM. This is Mortgage Nuggets. The mortgage newsletter that gives you the 411 on all the best mortgage news for the day. Every Mon, Wed, and Fri morning.

Welcome to the 341 new folks joining us since Friday. Let's dive in!

 1. Fannie Mae's forecast

Fannie Mae Chief Economist Doug Duncan has predicted that the U.S. will head for a modest recession in the first half of this year, despite some positive economic indicators.

However, he believes 2024 will be a better year for the housing market.

In his latest forecast, Duncan predicts that

  • The housing market will pick up in 2024 if the Fed maintains its focus on labor market tightness. But if the Fed raises short-term rates to avoid inflation, the recovery will likely be delayed.

  • YOY GDP will shrink by 0.6% in the fourth quarter of 2023

  • a drop in total home sales by 21% this year to 4.52 million units, before rebounding in 2024 to 5.1 million units.

  • 2023 will be a slow year for the housing market, with $1.64 trillion in total originations this year, purchase volume falling to $1.28 trillion, and refinance business dropping by 50% to $356 billion

2. How home prices are expected to shift

Economists and analysts remain divided on the future of the US housing market, with some predicting a mild setback for home price growth and others seeing the early signs of a sharper correction.

Zillow's forecast is relatively bullish. Their latest housing forecast has U.S. home values falling just 1.1% between November 2022 and November 2023.

On the other hand, Moody's forecast is bearish, predicting a 5.1% drop in national home prices between the fourth quarter of 2022 and the fourth quarter of 2023 and a peak-to-trough decline of 10%.

Zillow predicts that 658 out of 897 housing markets will experience falling home prices between November 2022 and November 2023.

Some of the markets that are expected to see the largest declines include San Jose (-7.2%), Grand Forks, ND (-6.7%), Odessa, TX (-6.4%), San Francisco (-6.1%), and Santa Rosa, CA (-5.3%).

Zillow also expects 239 markets to see positive or flat home price growth between Nov 2022 and Nov 2023, with some of the markets that are expected to see the largest increases include Atlantic City, NJ (+4.2%), Homosassa Springs, FL (+4.2%), and Yuma, AZ (+3.7%).

3. The other side of LLPA fee changes


LLPA changes will have negative implications for some groups of borrowers.

  • Most "cash-out" loan borrowers will face significant increases in LLPA fees.

  • Investors will also pay higher fees as per the new pricing matrix.

  • Middle-of-the-road borrowers will also be affected by higher fees. Borrowers with FICO scores between 720-739 and 740-759 will pay more in LLPA fees, sometimes thousands more.

“Fees are raised on some borrowers with good credit scores and moderate down payments, hitting middle-wealth homebuyers,” the NAR noted in a statement Thursday.

“In the wake of a three-percentage point increase in mortgage rates, now is not the time to raise fees on homebuyers,” the NAR said.

4. Existing home sales fell for the 11th consecutive month

 Homes sales ended the year at a seasonally adjusted, annualized pace of 4.02 million units, which was 34% lower than December 2021.

It is the slowest pace since November 2010, when the nation was struggling through a housing crisis.

Home sales have now fallen for 11 straight months, due to much higher mortgage rates.

5. Meme of the day

✅ Tech tip: Yet another reminder that you can just type docs.new or sheets.new into the URL bar on your browser to open a new Google Doc or Sheet.

☀️ See you on Wednesday!

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