Many factors have contributed to Fannie Mae’s updated prediction for end-of-year and 2021 growth. Stronger-than-expected data coming in, positive vaccine developments, and increased talks of additional stimulus have helped keep the economy moving ahead.
Originally forecasted at negative 2.5%, full-year growth is now expected to be negative 2.2%, a .3% increase. And the 2021 forecast has gone from 3.3% growth to 4.5% growth, a healthy 1.2% increase. Fannie Mae has even gone as far as predict that 2022 will experience 3.2% growth, which has increased .2% since November’s original prediction.
As for the housing market, October was stronger than predicted, but things are slowing down. However, Q4 is now forecasted to hit 7.6 million as opposed to the original prediction of 7.16 million.
Naturally, the faster pace of existing sales has also altered the forecast for mortgage originations. 2020 should hit $4.29 trillion—up $169 billion—and 2021 is predicted to reach $3.47 trillion—up $745 billion.
Inventory in the housing market continues to be an issue, but 2021 Q1 should still be stronger than Q1 of this year, up 12.1%. And rapid appreciation has made homes less affordable. In fact, the CoreLogic National Home Price Index reports home prices have jumped 7.3% between October 2019 and October 2020.
The demand for new builds continues to climb, as well. Single-family new construction rose 6.4% in October, the highest rate since 2007. However, Fannie Mae reports this pace is unsustainable and should taper off by spring.
As for the current trend of people moving to more spacious areas, specifically suburban locations, whether or not it’s fueled by Covid-19 remains to be seen. But regardless, the trend doesn’t appear to be slowing down anytime in the near future.
All in all, the housing market has done well, despite the many problems caused by the pandemic. And with recovery—both economic and for a more typical way of life—on the horizon, the housing market will continue to do well.