Much like other industry expectations of a “new normal” post-Covid, Fannie Mae is predicting the housing market will gradually settle into its own new normal.
Fannie Mae’s Economic & Strategic Research (ESR) Group recently penned its 2022 outlook, acknowledging that while it’s too early to tell when Covid will end. The team expects to see some pre-pandemic patterns begin appearing.
The group said the policy responses put in place during Covid will be replaced with more typical economic and housing patterns.
The ESR said it is not expecting a full reversal, though, and some of the changes could linger long after the pandemic has ended.
The Federal Reserve’s first rate hike is now expected in March, indicating a cycle of slowing sales growth and opportunities to rebuild and replenish inventories.
Similar to other expert predictions, the ESR expects only a slight home-sales slowdown compared to last year. But limited inventory will increasingly make purchasing difficult for hopeful homeowners.
However, the total number of homes under construction is at its highest since 1973. Supply should increase later this year. This all depends on supply chain issues that are delaying many build projects.
The scorching demand for homes that were driven by Covid is expected to wane. But the ESR says it may take time to determine whether these homeowners will remain where they are, or continue shifting working and living arrangements post-Covid.
The ESR notes many uncertainties moving forward, especially those hinging on inflation, supply issues, and the Fed’s actions.
The group revised its original forecast for purchase mortgage origination volumes for 2021 to include a slight dip, but the forecast for future growth was revised upward.
Refinance forecasts also were revised downward, due to higher interest rates sooner than expected.
While market predictions are helpful for future planning and perspective, experts advise homeowners and potential buyers to not place too much weight on them.
Instead, borrowers should make decisions based on their personal goals, finances, and discussions with their mortgage lenders.
While mortgage interest rates are continuing to rise and home supply is dwindling nationally, numbers can vary based on location. It’s still possible to find a personally favorable mortgage rate and affordable home.
As far as refinancing, experts remind borrowers there’s still a record amount of equity locked up in homes. They suggest speaking with a mortgage lender to determine all options and what is a smart personal financial choice.
Even if purchasing isn’t an option, it may be possible to use a cash-out refinance to tap into equity and make home improvements.