U.S. Purchase Mortgage Originations to Break $1 Trillion in 2016

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First Time Purchase Originations Break $1 Trillion Level Since 2007
 
The Mortgage Bankers Association (MBA) announced today that it forecasts $1.10 trillion in purchase mortgage originations during calendar year 2017, an 11 percent increase from 2016.  In contrast, MBA anticipates refinance originations will decrease by 40 percent, resulting in refinance mortgage originations of $529 billion.  In total, mortgage originations are expected to decrease to $1.63 trillion in 2017 from $1.89 trillion in 2016.

For 2018, MBA is forecasting purchase originations of $1.18 trillion and refinance originations of $410 billion for a total of $1.59 trillion.

"We are projecting that home purchase originations will increase further in 2017, building on an estimated 10 percent increase in 2016. Strong household formation coupled with further job growth, rising wages, and continuing home price appreciation will drive strong growth in purchase originations in the coming years," said Michael Fratantoni, MBA's Chief Economist and Senior Vice President for Research and Industry Technology.
 
"We expect that overall economic growth will be in a range of 1.5-2.0 percent over the next three years - not robust, but strong enough to lead to further job and wage growth.   While inflation is still moderate, it is rising, and with a job market close to full employment we expect the Federal Reserve will raise rates again at the end of 2016.  Rate increases through 2017 and 2018 will likely be gradual, as Chair Yellen and the Fed have indicated that they are going to be cautious going forward.  Historically low, and in some cases negative, rates around the world continue to put downward pressure on longer-term US rates, keeping them lower than the domestic growth environment would otherwise warrant. We expect that the 10-Year Treasury rate will stay below three percent through the end of 2018, and 30-year mortgage rates will stay below 5 percent over the same period.

"We forecast that monthly job growth will average 125,000 per month in 2017, down from about 180,000 per month in 2016, and that the unemployment rate will average 4.6 percent over the next few years. A stabilization in labor force participation rates will keep the unemployment rate from decreasing much further.

"With the Brexit vote in June, and with the financial market volatility earlier in the year, refinance volume was much higher than anticipated.  The world is an uncertain place, and there is always a chance that rates could drop again in response to global turmoil, but we expect that refinance volume will most likely be much lower over the next few years as homeowners have repeatedly had the opportunity to lower their rates, and there will be fewer households with an incentive to refinance if rates follow the path we are projecting," Fratantoni said.