The housing market continues to struggle with low levels of housing inventory due to buyer demand, and Fannie Mae revised its growth forecast down for 2021 due to these and other economic disruptions.
Fannie Mae brought its full-year 2021 growth outlook for growth domestic product (GDP) from its previously forecasted 7% down to 6.3%, according to the latest report from its Economic and Strategic Research (ESR) Group.
The mortgage giant said COVID-related disruptions to spending and supply chains will significantly impact economic activity in the second half of this year, more than what it had previously forecasted, according to its August 2021 commentary. Fannie Mae also said its decreased prediction was based on a weaker-than-anticipated second-quarter GDP reading.
However, this decrease was partially offset by a predicted increase in 2022 GDP growth, up from the previously predicted 2.8% to 3.2% annually.
Homeowners who are struggling economically due to the pandemic can save money through a mortgage refinance by getting low interest rates. Visit Credible to find your personalized rate and see how much you could save.
Fannie Mae predicts fewer home sales
The ESR Group also downgraded its housing market forecast for single-family home sales through the second half of 2021. Because inventory shortages continue to struggle, the economists decreased their housing market predictions from 6.71 million home sales annually to 6.66 million sales. But this would still represent a 3.1% increase in sales from the real estate market from 2020.
And as home sales drop, Fannie Mae said mortgage refinances will make up a greater share of mortgage originations versus buyers, increasing from 56% to 58% of all mortgages. Refinances could then fall to 41% of all mortgages in 2022. Home prices will continue rising, showing 14.8% price growth in 2021 and are hitting record highs for a home’s median home price.
"While the recent surge of COVID-19 cases appears to be affecting consumer behavior, the economic response so far has been modest compared to last year’s outbreak, and its impact on our latest forecast is similarly slight, albeit to the downside," said Mark Palim, Fannie Mae vice president and deputy chief economist.
"For the housing market, at current case levels, the lack of inventories of homes for sale and continued supply chain bottlenecks experienced by homebuilders remain the primary constraints on home purchase activity," Palim said. "Moreover, while mortgage rates have drifted downward and in theory provide greater purchasing power to potential borrowers, in practice, given current supply-side and affordability challenges, we expect that benefit to be limited."
If you are considering a mortgage refinance, compare several lenders to find which one offers you the best rate. You can use an online marketplace like Credible to compare multiple mortgage lenders at once.
How to save money through a mortgage refinance
As refinances take on more market share this year amid low inventory, many homeowners are considering refinancing their mortgage. With interest rates currently below 3% on average for a 30-year fixed-rate mortgage, homeowners could save significantly on their monthly payments amid record-low mortgage rates. Here are some top ways to save money through a mortgage refinance:
Compare multiple lenders: Many borrowers end up going with the first lender they get prequalified with. However, by shopping and comparing multiple lenders, borrowers can find the best rates for them and save on their monthly payments and over the life of the loan. Visit Credible to compare multiple lenders at once.
Remove primary mortgage insurance: Primary mortgage insurance (PMI) is charged to homeowners who have less than 20% equity in their home. But after this year’s rising home prices, many homeowners have more equity and can remove the mortgage insurance. For those with conventional loans, this could be as simple as calling the mortgage servicers and telling them to remove the insurance. However, for some government-backed home loans such as an FHA mortgage, the only way to remove the insurance payments is through a refinance. This could decrease a homeowner’s monthly mortgage payment by hundreds of dollars.
Change your loan terms: Homeowners need to decide what they want out of a refinance. For example- changing the loan terms from a 30-year mortgage to a 15-year mortgage significantly reduces the amount of interest paid over the life of the loan, but could increase monthly payments. Alternatively, lengthening the loan term and reducing the interest rate will decrease monthly mortgage payments.
If you have questions about the best option for you, contact Credible to speak to a home loan expert and get all of your questions answered.
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