Housing News

Here's What to Expect in Housing for the Rest of 2020 and Beyond

It's pretty safe to say that this year has been an unprecedented one, for both the country as a whole and the nation's housing economy. Even though the U.S. has been in the full throes of a pandemic for seven months, the nation's housing market has arguably never been hotter than it has been during that same period.

The latest data from the National Association of Realtors, for example, shows that pending home sales hit a record high in August. Meanwhile, the mortgage market has also performed incredibly well, shattering all projections of how 2020 was going to go, with the success driven by consistently low mortgage rates over the last several months.

According to the latest projections from two of the nation's top housing market observers, it looks like the real estate business roaring '20 is going to close on a high note.

The latest forecasts from the Mortgage Bankers Association and Fannie Mae both show that home sales and mortgage originations will remain elevated well above expectations in the remaining months of 2020.

According to the MBA, sales of both existing homes and new homes in the just-completed third quarter far exceeded home sales in the traditionally strong spring homebuying season. In the second quarter, when home sales are typically the strongest, MBA data shows that 2020 home sales were down when compared to the previous year. However, the MBA is projecting that home sales in the third quarter were the highest in at least 18 months.

The trade group's economists expect that trend of strong sales to continue in the fourth quarter, with both new and existing home sales expected to remain well above 2019's figures.

Fannie Mae's economists see the rest of 2020 for the housing market in much the same way that the MBAs do.

Fannie Mae's projections also show that home sales in the second quarter were down well below last year, but just as the MBA did, Fannie Mae is projecting those figures to rise for the rest of 2020.

According to both organizations, the housing market's performance will remain strong throughout 2021, with sales of both new and existing homes projected to continue at high levels for all of next year.

Both groups also expect home prices to continue rising over the next 15 months, although the MBA expects home prices to decrease slightly towards the end of next year, but only from an elevated level earlier in the year.

As for the mortgage business, both organizations expect mortgage rates to remain at or near record lows for the remainder of this year, but the groups differ on what happens after that.

According to the MBA, the prevailing market interest rate for a 30-year fixed-rate mortgage is expected to be 3.1% in the fourth quarter and remain that low through the first quarter of 2021. From there, the MBA expects interest rates to rise, albeit modestly, climbing to 3.3% by the end of 2021.

Fannie Mae, on the other hand, expects interest rates to decline below their record low level in the coming months, falling from 3% to 2.8% in the fourth quarter. Fannie Mae expects interest rates to remain at 2.8% in the first quarter of 2021, before falling to 2.7% in the second quarter and remaining at that level for the rest of the year.

It should be noted that the latest data from Fannie Mae's government-sponsored enterprise counterpart, Freddie Mac, shows the prevailing market interest rate was 2.88% during the week that ended Oct. 1, 2020.

Freddie Mac's weekly mortgage report, which is considered the industry standard of mortgage rate data, shows that mortgage rates have fallen precipitously throughout 2020. The decline began in March as the pandemic took hold in the U.S., and eventually drove mortgage rates below 3.3%, which had never happened before.

Rates that low (and lower) have become commonplace since then, with the prevailing rate remaining consistently below 3% since late July. And according to Fannie Mae, they will remain that way through the end of next year.

Both groups' economists also expect mortgage originations to remain well above the standard level for the rest of this year, although the expectation is that there will be a slight retreat from the second quarter's record-shattering totals.

Both groups expect the refinance wave that drove much of the mortgage business this year to taper off somewhat as the calendar flips to 2021.

Regardless, both groups expect 2021 to be a better year for the mortgage business than 2019 was, even if next year doesn't quite reach the astronomical heights of this year.