MBA Still Expects Mortgage Rally to Begin This Year
January's rise in existing home sales is a step up, but the MBA says lingering high interest rates are hindering progress.
The long-anticipated rally in mortgage production got a toehold in 2024 as the National Realtors Association (NAR) reported Thursday that sales of existing homes rose 3.1% from December to January.
January sales were at a seasonally adjusted rate of 4.0 million homes a year, up from 3.78 million in December. Last year saw the lowest volume of home sales in 30 years, and NAR and the Mortgage Bankers Association (MBA) have been forecasting a pickup in home sales in 2024 for months.
Curt Long, chief economist for America’s Credit Unions, said the rise in January’s existing home sales demonstrates the economic strength of American households.
“The housing market has thawed a bit in 2024 as lower mortgage rates have brought more supply onto the market,” Long said. “While rates remain above their year-ago level, a strong labor market and solid household balance sheets are supporting demand.”
Long said new construction has grown steadily, helping to keep price growth in check.
The nation’s 10 largest credit unions originated $24.5 billion in first mortgages in 2023, down 45% from 2022.
“While home sales remain sizably lower than a couple of years ago, January’s monthly gain is the start of more supply and demand,” NAR Chief Economist Lawrence Yun said. “Listings were modestly higher, and home buyers are taking advantage of lower mortgage rates compared to late last year.”
NAR reported more than half of homes sold for more than $379,100 in January, an increase of 5.1% from January 2023’s median price of $360,800.
“The median home price reached an all-time high for the month of January,” Yun said. “Multiple offers are common on mid-priced homes, and many homes were still sold within a month. The elevated share of cash deals – 32% – indicated a market full of multiple offers and propelled by record-high housing wealth.”
The MBA’s latest monthly forecast released Tuesday abandoned the recession prediction of previous forecasts, but made little change in its expectations for mortgage originations this year.
The Feb. 20 forecast lowered first-mortgage purchase originations for the second and third quarter and raised them for the fourth quarter. The net effect is to lower purchase originations by 0.4% for the year.
The MBA now expects banks, credit unions and other lenders to originate $1.53 trillion in purchase mortgages in 2024, up 22% from 2023.
Refinance forecasts were unchanged. And from the basement, there’s not much room for any movement but up; the MBA expects them to rise 50% to $471 billion this year.
The MBA has been predicting a mild recession since October 2022, but it appears to have faded into the sunset in the Feb. 20 forecast based on the old rule of thumb that recessions usually get called when gross domestic product falls for two quarters in a row.
In December, the MBA forecast a recession for the first half of 2024, but it was scaled back to a shallow dip in its Jan. 19 forecast, which showed GDP falling just 0.1% in the first quarter and 0.3% in the second quarter. The Feb. 20 forecast expects GDP to rise 0.9% in the first quarter, rise 0.3% in the second quarter and growth to continue through 2026, the end of its forecast horizon.
The MBA is still forecasting that the rate for 30-year fixed-rate mortgages will fall to 6.1% by the end of this year.
The MBA’s Weekly Mortgage Applications Survey released Wednesday showed the number of applications for purchase mortgages in the week ending Feb. 16 fell 10.6% from the previous week after seasonal adjustments and was 13% lower than the same week a year earlier. Refinance applications fell 11% from the previous week and were 0.1% higher than the same week a year ago.
“Mortgage rates moved back above 7% last week following news that inflation picked up in January, dimming hopes of a near term rate cut,” Chief Economist Mike Fratantoni said.
“Mortgage applications dropped as a result with a larger decline in refinance applications,” Fratantoni said. “Potential homebuyers are quite sensitive to these rate changes, as affordability is strained with both higher rates and higher home values in this supply-constrained market.”
Refinances were 32.6% of total applications last week, down from 34.0% the previous week. Adjustable-rate mortgages were 7.4% of total applications.