The Mortgage Bankers Association (MBA) today forecast that purchase mortgage originations are expected to grow 9% to a record $1.73 trillion in 2022.
In addition, after an anticipated 14% decline in 2021, the MBA is forecasting that refinance originations will slow further next year, decreasing by 62% to $860 billion from $2.26 trillion in 2021.
The forecasts were part of MBA's 2022 outlook, presented during its 2021 Annual Convention & Expo by Mike Fratantoni, chief economist and senior vice president for research and industry technology; Joel Kan, associate vice president of economic and industry forecasting, and Marina Walsh, CMB, vice president of industry analysis.
MBA forecasts mortgage originations to total $2.59 trillion in 2022, a 33% decline from this year. In 2023, mortgage originations are expected to decrease to $2.53 trillion. Purchase originations, however, are forecasted to reach successive records in 2022 and 2023, while higher mortgage rates and fewer eligible homeowners will lead to further declines in refinance volume.
According to Fratantoni, MBA's 2022 forecast assumes continued, strong economic growth amid eventual easing of the supply-chain constraints that have curbed some economic activity this year.
"The economy and labor market rebounded in 2021, but overall growth fell short of expectations because of stubborn supply chain issues that fueled faster inflation, slowed consumer spending, and presented challenges in filling the record number of job openings available," he said. "With inflation elevated and the unemployment rate dropping fast, the Federal Reserve will begin to taper its asset purchases by the end of this year and will raise short-term rates by the end of 2022."
MBA's baseline forecast is for mortgage rates to rise, with the 30-year, fixed-rate mortgage expected to end 2021 at 3.1% before increasing to 4.0% by the end of 2022.
"Mortgage lenders and borrowers should expect rising mortgage rates over the next year, as stronger economic growth pushes Treasury yields higher," Fratantoni said.
Robust homebuyer demand from millennial households, households seeking more space, and still-low mortgage rates are favorable tailwinds for the housing market in 2022 and are behind MBA's expectations of record purchase originations over the next two years.
With home prices reaching record highs over the past year, and more recent new construction being larger and more expensive, average loan sizes have also grown and affordability has weakened — especially for first-time buyers. Kan does expect some of the affordability challenges to ease as for-sale inventory grows and home-price growth moderates.
"Credit availability is still around 30% lower than pre-pandemic levels,” Kan said. “Mortgage supply will need to increase modestly so that qualified buyers can get access to financing for their home purchase.”
According to Walsh, the industry is moving away from the record-high, extraordinary production profits of 2020. As production volume declines and the market shifts toward fewer refinances and more purchase activity, competition will further stiffen. In this environment, lenders can only chase market share for so long before there are substantial consequences to the bottom line.
