Mortgage Bankers See Better Gains Happening Later This Year
Latest forecast pushes more origination gains from the first half to the second half, but the overall economic outlook brightens.
Mortgage Bankers Association economists have become more sour on originations in the first half of 2024, and more optimistic about the second half and the economy as a whole.
The MBA’s Jan. 19 forecast showed little change overall for 2024, when it still expects total first-mortgage originations to rise 22% from the dismal lows of 2023.
The Jan. 19 forecast lowered total originations in the first half by 5% compared with the previous Dec. 10 forecast, but raised originations by 5% for the second half.
With those changes, the MBA now expects purchase originations of $693 billion in the first half of this year, up 8.6% from the first half of 2023. The MBA expects second half purchase originations to rise 23% to $843 billion.
Refinances are expected to rise 24% to $196 billion in the first half, and rise 76% to $275 billion in the second half. The first-half forecast was lowered 9%, but the second half was unchanged.
Last month, the MBA forecast a recession for the first half of 2024, but the new forecast showed it would be shallow if it is based on the old rule of thumb that recessions usually get called when gross domestic product falls for two quarters in a row.
The MBA now expects GDP to fall just 0.1% in the first quarter, and 0.3% in the second quarter. In December, the MBA was forecasting drops of 0.3% in the first quarter and 0.5% in the second quarter.
The MBA also is expecting its predicted rise in joblessness this year to be milder. It now expects the unemployment rate to rise from 3.7% in December 2023 to 4.5% in December 2024. It had previously forecast unemployment to end this year at 5%.
Its 2024 outlook has also improved for housing starts, but it has dimmed for sales of existing homes.
Joel Kan, the MBA’s deputy chief economist, said in a Jan. 18 report that applications for new home purchases in December were 22% higher than a year earlier – the 11th consecutive year-over-year increase in applications.
“The low level of existing homes for sale continues to divert prospective buyers to newly built homes,” Kan said. “Compared to November 2023, applications were down 4% on a non-seasonally adjusted basis, consistent with December declines for the past two years.”
Overall mortgage applications in the week ending Jan. 12 were 10.4% higher than the previous week after seasonal adjustments, as refinances rose 11% and purchases rose 9%. Purchases were still 20% lower than a year earlier.
Kan said the 30-year fixed mortgage rate decreased 6 basis points to 6.75% — the lowest rate in three weeks. The MBA is still forecasting rates will fall to 6.1% by year’s end.
“Mortgage rates declined across all loan types as Treasury yields moved lower last week on incoming inflation data, which helped to support a rise in mortgage applications,” Kan said.
He added, “Compared to a holiday-adjusted week, both purchase and refinance applications were up, and the increases were heavily driven by the conventional market. Although purchase activity is lagging year-ago levels, refinance applications have improved from their recent low point and have been showing year-over-year gains, albeit at low levels.”
“If rates continue to ease,” he said, “MBA is cautiously optimistic that home purchases will pick up in the coming months.”
National Association of Realtors Chief Economist Lawrence Yun expressed a similar view as NAR reported Jan. 19 that existing home sales in December fell a seasonally adjusted 1% from November to the lowest level since 1995 and fell 6.2% from a year earlier.
“The latest month’s sales look to be the bottom before inevitably turning higher in the New Year,” Yun said. “Mortgage rates are meaningfully lower compared to just two months ago, and more inventory is expected to appear on the market in upcoming months.”