MBA Cuts Origination Forecast Again

The Mortgage Bankers Association has lowered its first-half 2023 forecast for originations by 8%, as sales of new and existing homes continue to fall and interest rates remain high.

The MBA forecast dated Monday made downward revisions of 6% for purchases and 16% for refinances compared with its Nov. 21 forecast.

The MBA said it now expects total originations for January through June to fall 37% to $855 billion. Its Nov. 21 forecast was for a 32% drop. The MBA started trimming forecasts for 2023 in March.

First-half purchase originations are now expected to fall 22% to $670 billion. Its Nov. 21 forecast expected them to fall 17% to $712 billion.

Refinances in the first half are expected to be $185 billion, down 64%. Last month the MBA was expecting them to fall 57% to $220 billion.

The changes resulted in a 4% downward revision for total originations for the full year of 2023. The MBA said it now expects 2023’s total originations to fall 15% to $1.90 trillion as purchases fall 8% to $1.45 trillion, and refinances fall 33% to $449 billion.

“We expect this weakness in demand will persist in 2023, as the U.S. is likely to enter a recession,” Fratantoni said. “However, if mortgage rates continue to trend down, as we are forecasting, more buyers are likely to return to the market later in the year, as affordability improves with both lower rates and slower home-price growth.”

The National Association of Realtors reported Wednesday that existing homes sold in November at a seasonally adjusted annual rate of 4.09 million in November, down 7.7% from October and down 35% from November 2021.

“In essence, the residential real estate market was frozen in November, resembling the sales activity seen during the COVID-19 economic lockdowns in 2020,” NAR Chief Economist Lawrence Yun said. “The principal factor was the rapid increase in mortgage rates, which hurt housing affordability and reduced incentives for homeowners to list their homes. Plus, available housing inventory remains near historic lows.”

NAR also reported:

• Total housing inventory was 1.14 million units on Nov. 30, down 6.6% from October but up 2.7% from one year ago.
• The median existing-home price for all housing types in November was $370,700, up 3.5% from November 2021.
• Properties typically remained on the market for 24 days in November, up from 21 days in October and 18 days in November 2021.
• The 30-year fixed-rate mortgage averaged 6.31% as of Dec. 15, according to Freddie Mac. That’s down from 6.33% last week but up from 3.12% one year ago.

“The market may be thawing since mortgage rates have fallen for five straight weeks,” Yun said. “The average monthly mortgage payment is now almost $200 less than it was several weeks ago when interest rates reached their peak for this year.”

MBA’s Weekly Mortgage Applications Survey released Wednesday showed a 1% seasonally adjusted gain for the week ending Dec. 16 compared with the prior week. Refinance applications rose 6%, while purchases fell 0.1%.

Fratantoni said long-term rates, including mortgage rates, fell last week despite the Fed raising its short-term interest rate target by 50 basis points.

“The 30-year conforming rate reaching 6.34% – its lowest level since September,” Fratantoni said. “Refinance application volume increased slightly in response but was still about 85% below year-ago levels. This is a particularly slow time of year for home buying, so it is not surprising that purchase applications did not move much in response to lower mortgage rates.”