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The FHLMC (Freddie Mac) was created in 1975 to expand the secondary market for mortgages in the US. Along with the Federal National Mortgage Association (Fannie Mae), Freddie Mac buys mortgages on the secondary market.
Looking Ahead to 2018. The economic environment remains favorable for housing and mortgage markets. For several years, we have had moderate economic growth of about two percent a year, solid job gains and low mortgage interest rates. We forecast those conditions to persist into next year.
We expect these trends to drive the mortgage market of 2018:
Purchase mortgage volume increases
Rate refinance activity cools
Borrowers tap home equity
Purchase mortgage volume increases
Modest increases in home sales and house price growth
Year-to-date total home sales are the highest since 2007. Limited inventory will remain a persistent problem, and longer term trends like the aging of the population and declining mobility across all age groups will keep a lid on existing home sales growth. Given limited supply and robust demand, home price appreciation has been quite strong. The most recent report on the FHFA house price index indicates that house prices rose 6.6 percent from the second quarter of 2016 to the second quarter of 2017. Indeed, in many markets house price growth has topped 10 percent.
We have seen the mortgage market shift away from a refinance-dominated market to a more purchase-oriented market. That trend will likely continue in 2018. We forecast that the refinance share of mortgage activity will decline to 25 percent, the lowest annual refinance share since 1990.
If mortgage rates rise or remain flat, cash-out refinance activity will become an increasingly large share of total refinance activity. Mortgage debt growth will remain modest by historical standards. PREPARED BY THE ECONOMIC & HOUSING RESEARCH GROUP.
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