MBA Forecast: 2018 Purchase Originations to Increase to $1.2 Trillion

Mike Sorohan msorohan@mba.org

October 25, 2017

DENVER--The Mortgage Bankers Association projects 2018 purchase originations to reach $1.167 trillion, a 7.3 percent increase from 2017.

But the MBA forecast also calls for a 28.3 percent drop in refinance originations, to $430 billion. Overall, MBA expects mortgage originations to decrease to $1.597 trillion in 2018, from $1.688 trillion in 2017.

For 2019, MBA forecasts total originations to increase to $1.64 trillion, with purchase originations rising slightly to $1.24 trillion and refinances dropping to $395 billion.

In addition to the updated forward-looking forecast, MBA upwardly revised its estimate of originations for 2016 to $2.05 trillion from $1.89 trillion, to reflect the most recent data reported in the 2016 Home Mortgage Disclosure Act data release.

MBA Chief Economist Mike Fratantoni said 2018 home purchase originations could increase at nearly double the clip from 2017.

"The housing market has been hamstrung by insufficient supply, with inventories of homes remarkably low, given the home price growth we've experienced," Fratantoni said. "The job market remains strong; demographic trends are quite favorable; mortgage credit is becoming more available to qualified borrowers; and home prices should continue to rise. All the pieces are in place for stronger growth in 2018 and beyond."

Other key housing projections:

--MBA forecasts projects housing starts to rise steadily over the next few years, rising to 1.289 million in 2018 from 1.195 million in 2017, rising further to 1.376 million in 2019 and 1.438 million in 2020.

--Home sales are expected to show steady increases in the MBA forecast, with existing home sales rising slightly to 5.486 million units, seasonally adjusted, from 5.440 million in 2017. Existing home sales are expected to rise further to 5.810 million in 2019 and 5.991 million in 2020.

--New home sales are also expected to improve, rising to 623,000, seasonally adjusted, in 2018 from 584,000 in 2017 and to 662,000 in 2019 and 696,000 in 2020.

--Interest rates for 30-year fixed rate loans should rise slowly, finishing 2017 at 4.0 percent, rising to 4.6 percent in 2018, 5.0 percent in 2019 and 5.3 percent in 2020.

--Mortgage debt outstanding is expected to rise to $10.370 trillion in 2018 from $10.010 trillion in 2017, and increase to $10.760 trillion in 2019 and $11.130 trillion in 2020.

On the economic front, MBA projects overall economic growth at 2.0 percent for 2018, slowing slightly to 1.9 percent in 2019 and 1.8 percent in 2020. "We still expect long run growth potential in the US to be somewhat lower, as productivity gains have been persistently slow," Fratantoni said.

Although inflation remains low, Fratantoni said a tight job market is likely to increase inflationary pressures in the near term. MBA expects the Federal Reserve to raise rates this December, three times in 2018 and twice in 2019.

"The Federal Reserve has begun reducing its holdings of Treasury securities and mortgage backed securities, and this will put additional, modest upward pressure on mortgage rates," Fratantoni said. "We expect that the 10-Year Treasury rate will stay below 3 percent through the end of 2018, and 30-year mortgage rates will stay below 5 percent."

MBA projects monthly job growth will average 125,000 per month in 2018, down from 150,000 per month in 2017, and that the unemployment rate will decrease to 4.0 percent by the end of 2018.

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