Morning Report: Upbeat housing forecast from Fannie Mae

Vital Statistics:

 

Last Change
S&P futures 3252 7.25
Oil (WTI) 61.78 -0.04
10 year government bond yield 1.88%
30 year fixed rate mortgage 3.97%

 

Stocks are higher as investors are largely taking the day off. Bonds and MBS are up.

 

Mortgage applications fell by 5% last week as purchases and refis both fell by the same amount. “The 10-Year Treasury yield increased last week amid signs of stronger homebuilding activity and solid consumer spending, leading to a rise in conventional conforming and jumbo 30-year mortgage rates to just under 4 percent. With this increase, conventional refinance application volume fell 11 percent,” said Mike Fratantoni, MBA Senior Vice President and Chief Economist. “Refinance applications for government loans did increase, even though rates on FHA loans picked up. The change in the mix of business has kept the average refinance loan size smaller than we had seen earlier this year.” 

 

Fannie and Freddie both took up their estimates for 2020 economic growth and housing forecasts. Underpinned by a strong labor market, housing will finally take a leadership position in economic growth. “Housing appears poised to take a leading role in real GDP growth over the forecast horizon for the first time in years, further bolstering our modest-but-solid growth forecasts through 2021,” said Fannie Mae Senior Vice President and Chief Economist Doug Duncan. “In our view, residential fixed investment is likely to benefit from ongoing strength in the labor markets and consumer spending, in addition to the low interest rate environment. Risks to growth have lessened of late, as a ’Phase One’ U.S.-China trade deal appears to be in place and global growth seems likely to reverse course and accelerate in 2020. With these positive economic developments in mind, we now believe that the Fed will hold interest rates steady through 2020.”

 

The actual numbers are here. They see housing starts rising to 1.315 million units, and the 30 year fixed rate mortgage falling to 3.6%. Origination volume is expected to fall slightly to $2.04 trillion from $2.15 trillion in 2019. Purchase volume is expected to increase and refis are forecasted to fall. GDP growth is expected to come in at 1.9%

Author: Brent Nyitray

Why do you need new bands? Everyone knows rock attained perfection in 1974. It's a scientific fact. - Homer Simpson

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