The Mortgage Bankers Association (MBA) announced that it expects to see $1.2 trillion in purchase mortgage originations during 2018, a 7.3 percent increase from 2017, helping the overall market dip just slightly from $1.69 trillion in 2017 to $1.6 trillion forecast in 2018.
MBA forecasts a significant drop again in 2018 in refinances with an expected increases in interest rates. MBA’s forecast calls for a 28.3 percent drop in refinance originations in 2018 to $430 billion.
The forecast for 2019 calls for a slight increase in total originations to $1.64 trillion even as refinances are expected to dip again to $395 billion. That change comes because the move to a purchase-driven market is expected to drive originations to $1.24 trillion. That would be an increase of 10.7 percent from 2017 levels, and a 3.3 percent increase from 2018.
“We are projecting that home purchase originations will increase at a faster clip in 2018, nearly double the rate that they increased in 2017,” MBA Chief Economist Michael Fratantoni said in a press release. “The housing market has been hamstrung by insufficient supply, with inventories of homes remarkably low given the home price growth we have experienced. The job market remains strong, demographic trends are quite favorable, mortgage credit is becoming more available to qualified borrowers, and home prices should continue to rise.
“All the pieces are in place for stronger growth in 2018 and beyond.”
Fratantoni said the MBA project for economic growth is relatively stable, at 2 percent in 2018, 1.9 percent in 2019 and 1.8 percent in 2018.
“We still expect long run growth potential in the US to be somewhat lower, as productivity gains have been persistently slow,” he said.
Affecting the drip in refinances, Fratantoni said MBA expects six increases in interest rates over the Federal Reserve in the next two-plus years.
“ We expect the Fed will raise rates in December 2017, 3 times in 2018, and twice in 2019,” he said. “The Federal Reserve has begun reducing the its holdings of Treasury securities and mortgage backed securities, and this will put additional, modest upward pressure on mortgage rates. We expect that the 10-Year Treasury rate will stay below 3 percent through the end of 2018, and 30-year mortgage rates will stay below 5 percent.”
In addition to the updated forward-looking forecast, MBA upwardly revised its estimate of originations for 2016 to $2.05 trillion from $1.89 trillion, to reflect the most recent data reported in the 2016 Home Mortgage Disclosure Act (HMDA) data release.