As the end of 2017 draws near, expect forecasts on the housing market and the overall economy for the next year to start rolling in. The Mortgage Bankers Association (MBA), for one, predicts home purchase originations to increase in 2018.
Michael Fratantoni, chief economist and senior vice president for Research and Industry Technology at MBA, has this to say in support of stronger home purchase originations in 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. 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.”
$1.2-Trillion Home Purchase Outlook for 2018
The trade group forecasts purchase originations to reach $1.2 trillion in 2018, a 7.3% increase from 2017.
While next year bodes well for purchase mortgage originations, the opposite can be said of refinance originations. According to the MBA, refinances will continue to decline to reach $430 billion. That’s a 28.3% decrease from 2017.
Overall, mortgage originations in 2018 will be $1.60 trillion, down from $1.69 trillion in 2017.
Based on the MBA’s mortgage finance forecast in October, the purchase and refinance originations look like this:
Looking further to 2019, the MBA foresees a rebound in mortgage origination volume to $1.64 trillion: purchase mortgages will take up $1.24 trillion and refinances with $395 billion.
|Activity||1st Qtr 2018||2nd Qtr 2018||3rd Qtr 2018||4th Qtr 2018||Total|
|Purchase||$230 Bil.||$340 Bil.||$345 Bil.||$252 Bil.||$1.67 Trillion|
|Refinance||$125 Bil.||$105 Bil.||$100 Bil.||$100 Bil.||$430 Bil.|
The trade group did revise its forecast for 2016 to $2.05 trillion from $1.89 trillion in light of the latest public loan data from the Home Mortgage Disclosure Act.
The Years Ahead for the US Economy
The MBA predicts the U.S. economy to grow at a pace of 2% in 2018. GDP is forecast to dip slightly to 1.9% in 2019 and 1.8% in 2020 because of lower long-run growth potential driven by slow productivity gains.
Inflation, which is a key driver of interest rate hikes, will remain low although “a tight job market is likely to increase inflationary pressures in the near term,” according to the MBA. Jobs will have a monthly increase of 125,000 in 2018, down from 2017’s monthly growth of 150,000.
Speaking of interest rates, the trade group expects the 10-Year Treasury yield to remain below 3% throughout 2018. As to 30-year mortgage rates, they are projected to hold below 5%.
Bright Spots in the Housing Market
The MBA’s outlook on the housing market, particularly the home purchase activity is something to look forward to in a market beset by low inventory and high competition that push home prices up and edge affordability out. Not to mention the numerous hurricanes that damaged homes.
Another bright spot is that 667,000 new homes were sold in September, the highest level of new residential sales in almost a decade, as Reuters pointed out. From a month ago, this represents an 18.9% increase and a 17% increase from the past year, according to the Census Bureau. The growth in new home sales was spread out across all four regions in the U.S.Click to See the Latest Mortgage Rates»