MBA Predicts Increase in 2018 New Purchases, Decrease in Refinances

Blog posted On October 31, 2017

Last week, the Mortgage Bankers Association (MBA) issued a forecast of $1.2 trillion in purchase mortgage originations during 2018.  Despite the expected 7.3 percent increase in new purchases, the MBA predicts a 28.3 percent decrease in refinance originations.  The combined predictions would result in a composite decrease of $1.60 trillion in total originations.

This year, home buyers and sellers have faced numerous challenges in terms of availability and affordability.  While buyer demand remains strong, available homes for sale is constricting the market leading to home price apperception.  Mortgage rates are trending upwards as well, reacting to this year’s two federal rate hikes, further impacting affordability as down payment expectations grow and overall home costs increase.  Though the job market has strengthened, and unemployment continues to drop to historic lows, wage growth has been stagnant, limiting the ability to amass personal savings. 

An annual Experian survey showed more than one-third of Americans aged 18 to 34 reported they were likely to opt out of homeownership entirely over the next decade, up 8 percent from 2016’s results.  Median home values have increased over 20 percent from 2007 to 2017, while real wages have failed to surpass 10 percent growth over the same period of time.  National Association of Realtors chief economist Lawrence Yun explains, “there’s a mismatch.  Even over the last five years, home prices have easily exceeded income and wage growth.” 

From MBA chief economist and senior vice president of research and industry technology, Michael Frantantoni, “the housing market has been hamstrung by insufficient supply with inventories of homes remarkably low given the home price growth we have experienced.”  Despite these inventory concerns, Frantantoni concludes, “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.”

Sources: CNBC, National Mortgage Professional Magazine