MBA Shaves Forecast for Purchase Mortgages
New estimate revises down originations for this year and next as housing sales lag.
The Mortgage Bankers Association said it expects slower purchase mortgage volume in the second half of this year, and during next year’s peak selling months as housing sales weaken.
Its forecast dated April 17 called for $742 billion in purchase originations from July through December, a 15% gain from last year’s second half. However, it represented a 5% downward revision from the MBA’s March 20 forecast of $780 billion for this year’s second half.
The MBA also cut its purchase forecast for the peak months of April through September in 2024 by more than 4%. It now expects second-quarter 2024 purchase originations to rise 23% from a year earlier and third-quarter originations to rise 14%.
No changes were made for refinances.
The forecast reflected a dourer view than the MBA’s already dour outlook on the economy. The MBA and CUNA last October forecast a recession would start early this year, but have since moved the start time to late this year.
The MBA’s April 17 forecast raised its estimates up for new and existing home sales in this year’s first half, but dialed back expectations for this year’s second half and the full year of 2024.
Existing home sales are expected to fall 18% to 4.2 million this year and rise 14% to 4.8 million in 2024. New home sales are expected to fall 2% to 628,000 this year, and rise 11% to 699,000 in 2024.
The forecast was released Tuesday, two days before the National Association of Realtors’ release Thursday of its report for existing home sales in March.
The NAR reported that existing homes sold at a seasonally adjusted annual rate of 4.44 million in March, down 2.4% from February and down 22% from a year ago.
Half of homes sold for more than $375,700, a 0.9% drop in the median price from a year ago. Inventory rose 1% from February and 5.4% from March 2022.
NAR Chief Economist Lawrence Yun called the current housing market “unique.”
“Home sales are trying to recover and are highly sensitive to changes in mortgage rates,” Yun said. “Yet, at the same time, multiple offers on starter homes are quite common, implying more supply is needed to fully satisfy demand.”
“Home prices continue to rise in regions where jobs are being added and housing is relatively affordable,” Yun said. “However, the more expensive areas of the country are adjusting to lower prices.”
The MBA had forecast that rates for 30-year mortgages would fall to 5.3% by December, but its new forecast called for rates at 5.5% at year’s end.
So far this year, mortgage applications have bounced up and down with interest rates. For the week ending April 14, the MBA’s seasonally adjusted application index for purchases fell 10% from the previous week, while refinances fell 6%.
Joel Kan, the MBA’s deputy chief economist, said the drop in purchase application was caused by mortgage rates rising 13 basis points over seven days to reach 6.43% on April 14.
“Last week’s increase in mortgage rates prompted a pullback in application activity,” Kan said.
“With more first-time homebuyers in the market, we continue to see increased sensitivity to rate changes,” Kan said. “Affordability challenges persist and there is limited for-sale inventory in many markets across the country, so buyers remain selective on when they act.”
“Refinances also declined and accounted for just over a quarter of all applications, as rates remained more than a full percentage point above the same week a year ago,” Kan said. “This leaves very little refinance incentive for most homeowners.”