Lowered Expectations for Mortgages Next Year, MBA Report Shows
Demand falls with high rates, lower affordability and "economic uncertainty."
The Mortgage Bankers Association dialed back expectations again through the end of 2023 for both purchases and refinances as rates remain high and most buyers find payments less affordable.
The MBA’s Nov. 21 forecast said lenders will originate $1.98 trillion in total mortgages next year, down 12% from 2022 and 3.5% less than it expected in its Oct. 24 forecast. The sharpest downward revisions were for the first quarter, tapering off through the rest of the year.
Purchase originations for 2023 was revised downward 2.7% to $1.49 trillion. The revised amount is 5.4% lower than 2022.
Refinance originations for next year was revised downward 5.7% to $484 billion. The revised amount is 27% lower than this year.
The MBA also lowered its fourth-quarter forecast by 2.9% to $398 billion. The revised amount is 60% lower than a year earlier. That brought the forecast for 2022 down slightly to $2.24 trillion, a 49% drop from its 2021 peak of $4.44 trillion.
A CU Times analysis showed credit unions have shared the pain with steep drops in the third quarter — the latest data available. Among the 25 largest credit union mortgage producers (based on 2021 volume), originations in the third quarter were $13.3 billion, down roughly 50% from a year earlier and down 69% from $43.2 billion in the second quarter.
Among all lenders, the MBA estimated that third-quarter originations were $480 billion, down 55% from a year earlier and down 29% from the second quarter.
The declines have cut into mortgage lender earnings and forced layoffs, including some at credit unions.
The MBA reported that homebuyer affordability continued to deteriorate in October as the national median payment applied for by applicants increased 3.7% to $2,012 from $1,941 in September — far outpacing wage gains.
Edward Seiler, the MBA’s assistant vice president for housing economics, said prospective homebuyers continued to feel the effects of higher mortgage rates in October, with the 70-basis-point jump in rates leading to the typical monthly mortgage payment rising to a new survey high of $2,012.
“Higher mortgage rates are also squeezing the purchasing power of prospective buyers,” Seiler said. “The median loan amount last month decreased to $295,000 — the lowest level since January 2021. Weakening affordability and increased economic uncertainty are expected to slow home-buying activity in the final two months of the year.”
The MBA lowered its forecast for purchase originations by 2.4% to $332 billion in the fourth quarter. The revised amount is 31% lower than a year earlier.
Refinance originations for the fourth quarter was revised downward 5.7% to $66 billion. The revised amount is 87% lower than a year earlier.
A year ago, the MBA’s forecast for 2023 called for $1.85 trillion in purchases and $676 billion in refinances.
Since then, the purchase forecast has been lowered six times, and the refinance forecast has been lowered four times. The Oct. 24 forecast reflected downward revisions of 9.9% for purchases and 5% for refinances.