Fannie Mae Downgrades GDP, Home Sales, Mortgage Originations

In another sign of a weakening housing market, Fannie Mae downgraded its GDP forecast for this year and its forecasts for home sales and mortgage originations. 

According to a mid-May release, it now projects real GDP growth, measured on a Q4/Q4 basis, to be only 1.3 percent in 2022, down from the previous forecast of 2.1 percent, and to decline in 2023 by 0.1 percent, unchanged from our previous forecast.

It revised downward its projection of 2022 and 2023 total home sales by 3.7 percent to 6.1 million and 4.5 percent to 5.4 million, respectively. 

Also revised downward are total mortgage originations. It now expects 2022 origination activity to total $2.70 trillion and 2023 originations to total $2.25 trillion, down from the respective $2.82 and $2.41 trillion we’d previously projected. 

Fannie: Further Slowdown Coming

With mortgage rates continuing to rise—now at their highest level since 2009—Fannie Mae also forecast a continued slowdown in home sales to be followed by softening construction activity and, lastly, by a large deceleration in house price growth.

Housing Costs ‘Within a Whisper’ of 2006’s Peak of Market

Separately, the Data & Analytics division of Black Knight, just released its latest Mortgage Monitor Report, based upon the company’s industry-leading mortgage, real estate and public records datasets. 

“Price growth thus far has created a very difficult environment for prospective homebuyers to navigate, according to the report. 

The monthly P&I payment required for the average home purchase is up nearly $600 since the start of the year, Black Knight said, and factoring in current income levels, housing “is now within a whisper of the record low affordability seen at the peak of the market in 2006. Even modest increases in either rates or home prices at this point would push us over that line.”

Affordability Pressures Boosting ‘Housing Wealth’

Black Knight added that while rising home prices and volatile interest rates continue to compound the affordability pressures in the housing market, the same dynamics have led to increasing the housing wealth of American mortgage holders by a significant margin.

According to Black Knight Data & Analytics President Ben Graboske, “tappable equity—the amount available for mortgage holders to borrow against while retaining a 20% equity stake in their homes—has reached yet another all-time high.

“Home-price growth cooled—albeit very slightly—in April,” Graboske said. “While a downward shift from 20.4% to 19.9% annual growth is hardly cause for concern, it’s also likely we’ve not yet seen the full impact of recent rate increases. 

“Rather, April’s decline is more likely a sign of deceleration caused by the modest rate increases in late 2021 and early 2022 when rates first began ticking upwards. The March and April 2022 rate spikes will take time to show up in repeat sales indices.”