MBA Predicts Origination Volume to Increase 19% in 2024

October 19, 2023

The Mortgage Bankers Association (MBA) expects total mortgage origination volume to increase to $1.95 trillion in 2024 from the projected $1.64 trillion in 2023.

Purchase originations are forecast to increase 11% to $1.47 trillion next year. By loan count, total mortgage origination volume is also expected to increase by 19 percent, to 5.2 million loans in 2024 from 4.4 million loans expected in 2023.

According to by Mike Fratantoni, MBA’s chief economist, the U.S. economy has been resilient throughout 2023, but MBA is forecasting that the combination of higher interest rates, tighter credit conditions, and a depletion of pandemic-era household savings will lead to a mild recession in the first half of 2024.

“Both fiscal and monetary policies have contributed to the much higher level of mortgage rates in 2023,” Fratantoni said. “The Fed’s hiking cycle is likely nearing an end, but while Fed officials have indicated that additional rate hikes might not be needed, rate cuts may not come as soon or proceed as rapidly as previously expected. Lower rates should help boost both homebuyer demand and increase the inventory of existing homes, thereby supporting purchase origination volume in 2024.”

“The job market will likely slow as we enter 2024, with fewer jobs added and the unemployment rate increasing from its current rate of 3.8 percent to 5.0 percent by the end of 2024. Inflation will gradually decline towards the Fed’s 2 percent target by the middle of 2025,” Fratantoni continued.

Fratantoni believes that as the economy slows and inflation moves lower, longer-term rates will decline from current levels, helping to bring mortgage rates lower. However, the spread between mortgage and Treasury rates remains roughly 120 basis points wider than typical, due to a combination of factors. MBA's baseline forecast is for mortgage rates to end 2024 at 6.1% and reach 5.5% at the end of 2025, as Treasury rates decline and as the spread narrows.

MBA expects national home prices will grow over the next three years, as tight inventory supports price growth. Kan emphasized that first-time homebuyers will account for a large portion of housing demand over the next few years, given the largest age cohort entering its prime homeownership ages. There will still be challenges, as median purchase and interest payments remain high, for-sale inventory is scarce, particularly for entry-level homes, and credit availability is low.

“New home sales continue to be stronger than existing-home sales, as buyers increasingly turn to newly constructed homes given the dearth of existing home listings and how competitive the bidding process still is,” said Joel Kan, MBA’s deputy chief economist. “Data from our Builder Applications Survey have shown solid year-over-year gains in purchase applications in recent months.”

Marina Walsh CMB, MBA’s vice president of industry analysis, said production losses persisted in 2023, and that it will likely continue through next spring.  

“Excess capacity continues to be a challenge for mortgage lenders, with low productivity levels and high expenses per loan,” said Walsh. “Lenders have reduced their head counts and gross expenses, but the record-low volume is a primary driver of these escalating per-loan costs.”

Last year at MBA’s Annual Convention, MBA estimated that a 30 percent decrease in mortgage industry employment from peak to trough will need to occur, given the decrease in production volume. MBA now estimates that the industry is roughly two-thirds of the way there.

“On the servicing side of the business, low delinquencies and prepayments means that servicing net operating income has risen in 2023, enabling many lenders to stay profitable overall,” Walsh said. “In 2024, delinquency rates are likely to increase as unemployment increases and borrowers are stressed by increasing property taxes and insurance and the resumption of student debt payments.”

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