The 2024 Mortgage Rally Sinks to Single-Digit Gain
Latest forecast from the Mortgage Bankers Association expects an 8% gain this year as high interest rates persist.
Mortgages fell to historic lows in 2023, and the Mortgage Bankers Association expected this year would show a strong recovery.
But the forecast it released Monday showed that the gain this year will be far smaller than it expected 16 months ago, as the Fed has kept interest rates higher for longer than economists’ models assumed.
The MBA’s forecast dated July 19 cut its second half forecast for purchase originations by 3.7%, while raising refinances by the same percentage.
Unfortunately, purchases are much larger, so the overall effect was to cut the forecast for total mortgages by 1.9% for the second half.
For the year, the MBA said it now expects total originations this year will rise 8.4% to $1.78 trillion. That’s down from a 9.6% gain in its June 24 forecast and down from its most optimistic forecast of a 25% gain for 2024 made in its forecast released in March 2023.
The March 2023 forecast also predicted an 18% gain in purchase originations in 2024, compared to the 1.6% gain to $1.35 trillion in its July 19 forecast. In March 2023, the MBA said it expected refinances to rise 47%, compared with the 37% gain to $431 billion in its July 19 forecast.
The MBA is shifting more of the gain into 2025, raising its forecast by 1.1%. It said it now expects total originations next year will rise 18.5% to $2.11 trillion.
Meanwhile, the MBA found the number of purchase applications for the week ending July 12 rose 3.9% from the previous week with gains in refinances and a continued retreat in purchases.
MBA Deputy Chief Economist Joel Kan said the rate for a 30-year mortgage with a conforming loan balance of $766,550 or less was 6.87% July 12, down from 7.00% a week earlier and the lowest rate since March 2024.
“Mortgage rates declined last week, as recent signs of cooling inflation and the increased likelihood of Fed rate cuts later this year pulled them lower,” Kan said. “Application activity was up 4%, driven by a 15% jump in refinances to the highest level since August 2022.”
“While FHA and VA refinance applications accounted for a significant share of the increase, these are likely recently originated loans with even higher than current offered rates,” he said. “Even with last week’s rate decline, purchase applications continue to lag, down 14% compared to last year’s pace.”