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Takeaways:
- Fannie Mae raised its forecast for July home sales from 5.65 million to 5.75 million.
- The Mortgage Bankers Association (MBA) also revved up its forecast for purchase originations to $801 billion this year, up $71 billion from its prior estimate.
- MBA Chief Economist Mike Fratantoni said the stronger job market and somewhat higher levels of inflation will lead the Fed to hike mortgage rates in September.
Encouraged by strong home sales and surging home prices in the busy spring and summer buying seasons, economists are ramping up their expectations for the mortgage and housing markets.
This week, Fannie Mae raised its forecast for July home sales from 5.65 million to 5.75 million, saying that improved consumer spending, residential investment and a waning drag from net exports are expected to boost economic growth by 2.8 percent annualized in the second quarter.
“We expect to see strong sales, lean inventories and rising confidence through the rest of the year, which should support increased homebuilding activity and give an added boost to economic growth,” said Doug Duncan, Fannie’s chief economist.
The Mortgage Bankers Association (MBA) also revved up its forecast for purchase originations to $801 billion this year, up $71 billion from its prior estimate. Next year, we may see $885 billion in purchase originations, an increase of $94 billion from the association’s previous forecast, MBA said.
“The housing market recovery has shifted to a higher gear,” said MBA Chief Economist Mike Fratantoni. “More sales are being financed, and more applications are being approved. We expect that this trend will continue into 2016 and beyond, as the broader economy and job market continue to improve.”
Fratantoni said the stronger job market and somewhat higher levels of inflation will lead the Fed to hike mortgage rates in September, and rates may hit 4.5 percent by the end of the year.
“However, the positive of the stronger job market will outweigh any negative of somewhat higher mortgage rates,” he said.
