Top Market Themes for October 2021

COVID-19 and Recovery

  • COVID-19 is officially America’s deadliest pandemic.
  • 2021 economic growth forecasts revised down due to Delta variant concerns.
  • COVID-19 pandemic risks are diverse.    

Policy Shifts

  • Removal of adverse market fee.
  • FHFA amended Preferred Stock Purchase Agreement (PSPA) and Capital Rule.
  • Increased focus on affordable housing supply, housing goals, underserved markets and racial equity.

Labor Market Developments

  • Labor market recovery from deep recession slowing.
  • Plunge in employment has had disproportionate impact on certain states.

Housing Trends

  • Purchase activity rebounds as mortgage rates stabilize.
  • Home sales remains at 2007 levels amidst inventory constraints.

House Price Appreciation

  • High home price increases have led to record homeowner equity.
  • Persistently high house price appreciation is affecting affordability.

Forbearance Trends

  • Forbearance share declined as many homeowners are nearing the end of their forbearance terms.
  • As of mid-August, market active forbearances accounted for 24 percent of all loans that entered the program versus 30 percent the previous quarter.

Third Quarter Forecast Released on October 15, 2021

  • The average 30-year fixed-rate mortgage (FRM) is expected to be 3 percent in 2021 and 3.5 percent in 2022. In 2020, the 30-year FRM averaged 3.1 percent. 
  • House price growth is expected to be 16.9 percent in 2021, slowing to 7 percent in 2022. Growth was 11.3 percent in 2020.
  • Home sales are expected to reach 6.8 million in 2021, remaining flat in 2022. Sales were 6.5 million in 2020.
  • Purchase originations are expected to increase to $1.9 trillion in 2021 and $2.1 trillion in 2022. This is up from 2020 when purchase originations came in at $1.6 trillion.
  • Refinance originations are expected to soften, declining from $2.6 trillion in 2021 to $995 billion in 2022. This is down from $2.9 trillion in 2020.
  • Overall, annual mortgage origination levels are expected to be $4.5 trillion in 2021 and $3.1 trillion 2022. These levels were $4.4 trillion in 2020.