Fannie Mae’s Economic and Strategic Research Group has released it’s November report, and in it, anticipates inflation to continue driving up mortgage rates in the near and long term.
The ESR Group’s expectations for inflation were upgraded to 6.2 percent on an annual basis in the fourth quarter. The Fed is expected to begin hiking its target rate in 25-basis-point increments beginning in Q4 2022. The group also published it’s first 2023 expectations for real gross domestic product (GDP) growth, which it projects at 2.1 percent—in line with the pre-pandemic domestic growth trend.
The ESR Group revised its housing expectations for 2021 home sales and construction. Estimates now stand for a 4.8 percent growth in single-family home starts and 13.9 percent growth in new single-family home sales in 2022.
While mortgage demand remains strong, the ESR Group expects that the Fed will begin to raise interest rates later next year, with the average 30-year fixed rate to land at 3.3 percent in 2022 and 3.5 percent in 2023.
Additionally, the report anticipates purchase volumes to total $1.9 trillion in 2021 followed by 6.8 percent growth in 2022 to $2 trillion. Refinance volumes of $2.5 trillion are projected in 2021 before slowing in 2022 and 2023 to $1.3 trillion and $1.1 trillion, respectively.