As Recession Looms, MBA Lowers Its Mortgage Volume Estimate

The Mortgage Bankers Association (MBA) still thinks the U.S. economy is headed for a recession this year, and has adjusted its forecast for the mortgage market accordingly. 

The MBA’s latest estimates, released Tuesday, predict the mortgage market will originate $1.8 trillion in loans for one-to-four family units this year, down 2.7% from its March forecast of nearly $1.85 trillion. 

The association’s prediction for mortgage loan origination volume has fallen in each month this year, in part because of the MBA’s growing concern over a coming recession. The MBA predicts the U.S. economy will shrink by 1.2% this quarter.

Watch The Interest

The MBA also said it expects the economy to emerge from a recession by the fourth quarter of this year. That will lead to a rebound in the mortgage market, with MBA economists predicting loan volume of $2.25 trillion in 2024, roughly equal to what the market did last year. 

Experts remain pessimistic about the mortgage market in part because single-family home prices increased at an annual rate of 4.7% from the first quarter of 2022 to the first quarter of 2023, according to a new report from Fannie Mae. 

While that's down from the revised annual growth rate of 8.6% in the fourth quarter of last year, home prices also rose 1% in the first quarter of this year. 

"The fact that prices rose slightly in the first quarter is evidence of significant pent-up mortgage demand, despite ongoing affordability constraints,” said Doug Duncan, Fannie Mae’s senior vice president and chief economist.

Duncan said the lack of housing supply will continue to keep home prices high, while higher interest rates will deter owners from listing their homes, since their existing mortgages have significantly lower rates.