With the economy growing more slowly next year, and interest rates staying low, Fannie Mae is predicting that home sales and mortgage originations will slip but still remain strong.
The secondary-market agency says it expects existing home sales to drop from this year's estimated record of 4.1 million to 3.9 million homes in 1997, and mortgage originations to fall from an estimated $785 billion this year to $710 billion next year.
Here are some of the highlights of Fannie Mae's economic forecast for 1997, as presented by its chief economist, David W. Berson, last week:
*After almost five years of economic expansion, there isn't much pent-up demand in the economy. So this year's estimated 2.8% growth in gross domestic product - somewhat higher than would be supported by demographic and other changes - likely ate into next year's expansion. Fannie Mae, formally the Federal National Mortgage Association, predicts that the economy will grow at a 2% clip in 1997.
*Factors that point to slower growth next year include rising consumer debt burdens and tighter lending standards at banks.
*Slower growth and stable inflation should keep interest rates low in 1997. Long-term rates already have fallen by about 75 basis points from their highs earlier this year, and Fannie Mae said it expects they will remain at current levels, unless economic growth is still weaker or the Federal Reserve Board eases monetary policy.
Fannie Mae is betting, however, that the Fed won't change course.
*Mortgage originations will fall by about 10% to $710 billion, as fewer homes are sold and fewer mortgages refinanced. Refinanced mortgages will likely account for 30% of home loans next year.
*Fixed-rate lenders, such as mortgage bankers, will benefit from the lower rates on 30-year mortgages. Adjustable-rate loans, which are projected to be 27% of all loans this year, will slip to 24% of the market next year.
*Housing starts will fall from a projected 1.46 million this year to 1.35 million next year. New home sales will fall from an estimated 749,000 this year to 664,000 next year. Existing home sales will drop from an estimated 4.01 million this year to 3.86 million next year.
Fannie's originations forecast is similar to the latest predictions from the Mortgage Bankers Association of America. David Lereah, the group's chief economist, expects originations to fall next year to $727 billion, from an estimated $792 billion this year. Like Mr. Berson, he is expecting refinancings to account for 24% of volume.
