Mortgage originations are expected to hit $2 trillion in 2016 for the first time in four years, according to Freddie Mac’s Outlook report.
Freddie Mac credits low interest rates with spurring an increase refinances. In fact, they forecasted more than 6 million homes will be sold, the highest level since 2006, according to the report.
"At the current pace, we're likely to see the mortgage market top $2 trillion in originations for the first time since 2012,” said Freddie Mac Chief Economist Sean Becketti. “And unlike in 2012, when the market was driven largely by refinances, today's market is more balanced between home refinances and purchases, nearly 50-50.”
“This is good news for home sales as we're likely to see the best year in home sales in a decade,” Becketti said. “This is a good sign for the housing market as it continues to be an even brighter spot in the economy.”
After a strong jobs report for July that beat economists’ expectations, mortgage rates began climbing up yet again after a drastic drop back to near all-time lows, according to Freddie Mac’s most recent report on mortgage rates.
Despite this climb, however, the report says interest rates will remain below 4% in 2016 and 2017. Mortgage rates in 2017 are forecasted to reach 3.7% for the average 30-year fixed-rate mortgage and 2.1% for the 10-year Treasury yield.
"However, the housing market still has challenges, which is reflected in our housing starts forecast,” Becketti said. “Low levels of inventory across many markets will continue to put upward pressure on house prices for the foreseeable future."
Housing starts, though at a slower pace of increase, will still increase over the next year, the report forecasts. Housing starts forecasts for 2016 and 2017 are set at 1.2 million and 1.4 million respectively.
Homebuilder confidence increased two points in August as new construction and new home sales increase, according to the Housing Market Index by the National Association of Home Builders and Wells Fargo.