According to the June 2022 commentary from Fannie Mae’s Economic and Strategic Research (ESR) Group, higher interest rates and elevated inflation are expected to continue to weigh on economic growth and home sales as the year progresses. As a result, the ESR has reduced its full-year 2022 growth forecast to 1.2%, and it continues to have expectations of a late 2023 economic contraction.
The ESR notes that significantly higher mortgage rates have become the primary constraint on the housing market. The ESR Group now expects total home sales to fall -13.5% in 2022–down even further from its 11.1% projected decline last month–and, correspondingly, for mortgage originations to move downward to $2.6 trillion in 2022 and $2.2 trillion in 2023.
Refinance origination activity, in particular, continues to slow, as evidenced by Fannie Mae’s new Refinance Application-Level Index, with only an estimated 2% of outstanding mortgages having at least a 50-basis-point incentive to refinance.
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Elevated Inflation, Higher Interest Rates Expected to Take Toll on Consumer Spending