On November 30, 2016 Freddie Mac's economists issued their monthly Outlook which, in light of the sudden surge in interest rates earlier that month, was decidedly gloomy.  MND's coverage of the forecast elicited a lot of concern from readers, especially when we quoted Freddie Mac that, under their new rate and housing expectations, "Mortgage originations (will) get crushed."  They predicted a decline in originations of 53 percent from 2016 to 2017.

Other predictions at the time included a leveling off of home sales, although "2016 will still end up being the best year for home sales in a decade, but 2017 will be hard pressed to match those levels" with a predicted decrease of 220,000 units Home price gains will moderate, finishing 2016 with an average gain of 5.9 percent, falling to 4.7 percent in 2017.  

Fast forward seven months. In the June Outlook, Freddie's economists are singing a different tune.  The earlier paper revisited a previous period when rates jumped quickly and unexpectedly, the so-called Taper Tantrum of 2013, to forecast the reaction of various housing measures to both the November surge and expectations for changes in Fed monetary policy. The current report is written in the context of "Weak growth, moderate inflation and a labor market at full employment," conditions Freddie Mac says are likely to persist.

The company calls housing a bright spot with home sales and construction thus far in 2017 the highest in years. Data did weaken in the past mouth; housing starts fell 2.6 percent in April and permitting was also down. Although strong in March, both new and existing home sales fell in April as well.  These declines are likely to reverse, Freddie says, as low mortgage rates and solid employment figures boost the housing market.  "We expect housing starts and home sales to firm in the coming months and for 2017 to exceed 2016's best-in-a-decade levels," they say. The year-end prediction is for total sales of 6.02 million, a 100,000 increase.

Recent declines in mortgages rates, which are down 30 basis points from the start of the year, have helped support refinance activity.  Still, they are still almost 50 points higher than the 2016 low.  Rates fell below 3.5 percent in 2016 and remained there for 16 weeks, and were below 3.7 percent for 37 weeks. Unless those rates reappear and hang around, which Freddie Mac does not expect will happen, refinance volumes will not match those in 2016. The company predicts mortgage origination volume will be down this year by about $370 billion, although midway through 2017, originations are running about even with 2016.