Mortgages for home purchases are expected to rise in 2017, despite a projected decrease in overall mortgage origination activity, according to the Mortgage Bankers Association.
The MBA predicts total mortgage originations will decrease from $1.89 trillion in 2016 to $1.63 trillion in 2017. However, purchase mortgage originations are expected to reach $1.1 trillion in 2017, an 11% increase over 2016, the MBA projects.
“We are projecting that home purchase originations will increase further in 2017, building on an estimated 10% increase in 2016,” Michael Fratantoni, MBA’s chief economist and senior vice president for research and industry technology, said in a news release. “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.”
At the same time, the MBA anticipates refinance originations will decrease by 40% to $529 billion in 2017.
“With the Brexit vote in June, and with the financial market volatility earlier in the year, refinance volume was much higher than anticipated … 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 in the release.
The MBA projects modest economic growth of 1.5-2% a year over the next three years and interest rate increases by the Federal Reserve likely will be gradual in 2017 and 2018.
“We expect that the 10-year Treasury rate will stay below 3% through the end of 2018, and 30-year mortgage rates will stay below 5% over the same period,” Fratantoni said in the release. “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% over the next few years.”
For 2018, the MBA forecasts purchase originations of $1.18 trillion and refinance originations of $410 billion for a total of $1.59 trillion, according to the release.
To learn more about the MBA’s forecast, click here.