MBA Expects Smaller Mortgage Rebound, CUs May See Better 2024
Mortgage Bankers Association lowers its forecast for second-half production, but predicts gains to start this fall.
The Mortgage Bankers Association’s latest monthly forecast showed it again lowering its expectations for production in the second half of 2023, but is now showing a brighter outlook for the start of 2024.
Even with the lower forecast, the MBA said it expects total mortgage originations to finally begin rising in the third quarter from year-ago levels for the first time since the second quarter of 2021.
Last October, the MBA forecast a recession in the first half of 2023, and mortgage interest rates peaking at 6.7% in December 2022, before falling to 5.4% by the end of 2023.
Since then, the MBA has been pushing an ever-diminishing recession out further, and interest rates, which again topped 7% earlier this month, are now expected to end the year at 5.9%, while the 5.4% mark won’t be hit until June 2024.
One direct result shown in the MBA’s July 20 forecast was that it lowered its forecast for refinances by nearly 10% in the second half. It also lowered its forecast for purchases by 1.1% in the second half, but raised its outlook for purchases in the first quarter by 7%.
With those changes, the July 20 forecast showed:
- Purchase originations of $753 billion in the second half, up 4.6% from a year earlier.
- Refinance originations of $210 billion in the second half, up 33% from a year earlier.
- Purchase originations of $338 billion in the first quarter of 2024, up 27% from a year earlier.
- Refinance originations of $122 billion in the first quarter, up 85% from a year earlier.
The federal government this week will shed light on both interest rates and the strength of the economy.
Some economists think the Federal Open Market Committee meeting Tuesday and Wednesday will raise the federal funds rate another 25 basis points, while others think recent data showing inflation cooling might cause it to skip a rate hike again.
In any case, many think the Fed is nearing the end of its current cycle of raising rates that began in March 2022. Rates went from near zero to about 5.25% in May. The Fed skipped a rate hike at its meeting that ended June 14.
On Thursday, the U.S. Bureau of Economic Analysis will release its first estimate of Gross Domestic Product (GDP) for the second quarter. Its last estimate for the first quarter showed GDP rose at surprisingly strong seasonally adjusted, annualized rate of 2% from the fourth quarter. The MBA forecast 1.4% growth for the second quarter.
In 2022, GDP fell 1.9% in the first quarter and fell 0.7% in the second quarter, which was not deemed a recession. That was followed by gains of 3.2% in the third quarter and 2.6% in the fourth quarter.
In October 2022, the MBA forecast GDP would have back-to-back drops of -1.9% in the first quarter and -0.7% in the second quarter. By its June 20 forecast, smaller back-to-back drops had shifted to the second half of the year.
Its July 20 forecast showed the drops again becoming shallower: -0.3% in the third quarter and -0.4% in the fourth quarter, with growth resuming in the first quarter of 2024.