Despite the lowest rates of the century, Freddie Mac scaled back its second-half forecast of residential originations by all U.S. lenders. A worsening outlook for purchase-money financing was responsible for the slimmer projection.
In its economic outlook last month, the secondary lender had third-quarter production at $300 billion and fourth-quarter volume at $230 billion.
But those projections have been replaced with a weaker outlook.
In its forecast released Monday, Freddie predicts that third-quarter volume will only come in at $299 billion, while fourth-quarter production is expected to reach just $221 billion.
The lower forecast came despite that the projection for third-quarter refinance volume was raised to $218 billion from $195 billion. Even the fourth-quarter refinance outlook was increased — to $144 billion from $115 billion.
The problem was lower expectations for purchase financing, which Freddie cut to $81 billion for the third quarter from last month’s estimate of $105 billion. The forecast for fourth-quarter purchase activity was slashed to $77 billion from $115 billion.
The latest prediction has conventional volume falling to $154 billion in the fourth quarter from the current quarter’s $214 billion, while FHA production is expected to decline to $67 billion from $85 billion.
Freddie said that the share of applications that will be for adjustable-rate mortgages will fall from 11 percent in the third quarter to 10 percent during the final three months of the year.
The McLean, Va.-based firm raised its overall first-quarter 2012 projection to $210 billion from the $188 billion predicted in the prior report.
For all of 2011, volume is expected to reach $1.200 trillion then tumble to $0.900 trillion in 2012. The following year, Freddie has mortgage originations unchanged at $0.900 trillion.
