Mortgage Forecasts Now Pulled Back Through 2023

The Mortgage Bankers Association cut its forecasts for 2022 originations for the third month in a row, including an 11% cut in its expectations for refinances.

The latest forecast released Monday was dated June 10, the same day the U.S Bureau of Labor Statistics reported record inflation for May.

The MBA forecast revisions preceded other developments affecting the mortgage market:

• On Thursday, the U.S. Census Bureau reported builders started construction on privately owned houses at a seasonally adjusted annual rate of 1.5 million, down 14.4% from April.
• On Wednesday, the Fed increased the federal funds rate by 75 basis points — its biggest increase since 1994. It also said it would continue selling off mortgage-backed securities, which the MBA said would be another force pushing mortgage interest rates up.
• On Wednesday, the MBA reported that mortgage applications for the week ending June 10 were 6.6% greater than the previous week. This followed three weeks of declines.

Joel Kan, the MBA’s assistant vice president of economic and industry forecasting, said refinances for the week ending June 10 were 4% higher than the previous week, but down 76% from a year earlier. Seasonally adjusted purchase applications rose 8% from the previous week, but were down 16% from a year ago.

“Mortgage rates increased for all loan types, with the 30-year fixed rate last week jumping 25 basis points to 5.65 percent – the highest level since 2008,” Kan said. “Mortgage rates followed Treasury yields up in response to higher-than-expected inflation and anticipation that the Federal Reserve will need to raise rates at a faster pace.”

The MBA also reported Thursday that mortgage applications for new homes in May fell by a seasonally adjusted 4% from April as mortgage rates hit 5.5%. “Activity was already constrained due to tight for-sale inventory, high sales prices and extended building completion timelines,” Kan said.

The average loan size for new homes fell slightly after 15 months of consecutive increases from April’s survey high to $430,855, which Kan said is “a potential indication that cooling demand may be starting to moderate price growth.”

The MBA’s June 10 forecast showed downward revisions from the second quarter through the end of 2023. The biggest downward revisions were for this year’s third quarter, and the changes tapered down through the next five quarters.

The changes included:

• For the third quarter, total originations were revised downward by 9% to $527 billion. The revised amount is 45% lower than a year earlier.
• Purchase originations for the third quarter were revised down by 1% to $417 billion. The revised amount is 5.7% lower than a year earlier.
• Refinance originations for the third quarter were revised downward by 30% to $110 billion. The revised amount is 79% lower than a year earlier.
• For the full year of 2022, total originations were revised downward by 4.1% to $2.41 trillion. The revised amount is 40% lower than a year earlier.
• Purchase originations for 2022 were revised downward by 0.8% to $1.68 trillion. The revised amount is 2.1% higher than a year earlier.
• Refinance originations for 2022 were revised downward 11% to $730 billion. The revised amount is 69% lower than a year earlier.
• For 2023, total originations were revised downward by 3.8% to $2.27 trillion. The revised amount is 6% lower than a year earlier.
• Purchase originations for 2023 were revised downward by 1.5% to $1.72 trillion. The revised amount is 2.3% higher than a year earlier.
• Refinance originations for 2023 were revised downward by 10% to $546 billion. The revised amount is 25% lower than a year earlier.