From MBA, a Cautiously Optimistic Housing Reforecast
DALLAS–Mortgage Bankers Association Chief Economist Mike Fratantoni said the housing market could end up being the winner in 2019, despite volatile economic conditions.
MBA recently upgraded its 2019 mortgage origination volume forecast, to $1.643 trillion. But Fratantoni, speaking here at the MBA Technology Solutions Conference & Expo, said the big picture remains uncertain.
“We’re going from 3.1 percent gross domestic product growth to about 2 percent in 2019,” Fratantoni said. “In the past, that suggests a risk for a recession.”
But Fratantoni noted the unemployment rate, at 3.7 percent, is the lowest in 50 years, and wage growth is picking up. “For the housing market, these are the most important indicators, as it indicates people are more willing to buy homes,” he said. “This could provide a nice tailwind in otherwise cautious economic data.”
Fratantoni said mortgage application growth, as measured by the MBA Weekly Applications Survey, suggest as much, with applications year to date supporting growth in the home purchase market. Additionally, homeownership rates continue to increase, particularly among younger home buyers.
“The question isn’t whether or not there is an appetite for loans–there is,” Fratantoni said. “The question is, are there enough existing and new homes available for them?”
Housing inventories remain tight, particularly for starter homes, with bidding wars persisting in many housing market. “But we are seeing some activity among move-up buyers,” he said. “I remain optimistic about the spring home-buying market; we’ll know in a few months if that optimism is warranted.”
Fratantoni also said last week’s Federal Open Market Committee meeting suggested the Federal Reserve is done hiking the federal funds rate, for now. Mortgage rates have fallen over the past several months, he added, and should remain in the 4.5-5 percent range for the rest of the year.
At the lender level, MBA reported this week independent mortgage banks and mortgage subsidiaries of chartered banks reported a net loss of $200 on each loan they originated in the fourth quarter. The MBA Quarterly Mortgage Bankers Performance Report said the $200 loss in the fourth quarter compared to a reported gain of $480 in the third quarter.
“The mortgage industry remains a very challenging environment,” Fratantoni said. “The real challenge for lenders moving forward is whether they can bring the cost of originating loans down.”
