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Home Purchase Mortgage Volume to Exceed $1 Trillion in 2017


Good News for Real Estate Agents

The Mortgage Bankers Association (MBA) expects home purchase lending to hit $1.1 trillion next year, per their latest economic forecast released this week.

That would mark an 11% increase from this year’s estimate and be the highest total since before the housing market took a turn for the worse nearly a decade ago.

While things have largely turned around since then, inventory constraints continue to hamper home sales.

Many first-time buyers are locked out of the market thanks to rising home prices and move-up buyers can’t move up because they lack the necessary equity and/or can’t find another home due to those inventory issues. That means fewer entry-level homes and essentially a logjam.

Meanwhile, home builders have yet to fill the void left by fewer distressed sales such as short sales and foreclosures that dominated the housing market in recent years.

Still, the MBA expects 2017 to be a banner year thanks to strong household formation, job growth, higher wages, and ongoing home price appreciation.

Perhaps next year will the year of “not wanting to miss out,” coupled with the fear of not getting a rock bottom mortgage rate before they finally rise. We shall see.

Purchase origination volume is expected to hit $990 billion this year, up from $903 billion in 2015.

It is expected to rise to $1.18 trillion in 2018 and $1.25 trillion in 2019.

Total Mortgage Volume Will Actually Fall

Unfortunately, the uptick in purchase activity will be more than offset by an intense drop in refinance activity over the next several years.

Total mortgage volume is actually forecast to peak this year at $1.89 trillion before falling to $1.63 trillion in 2017 and $1.59 trillion in 2018. It is slated to rise a bit in 2019, but remain below current levels.

You can thank flagging refinance volume for that, which is on pace for $901 billion this year but just $529 billion next year. That’s a 40% drop!

Seems extreme, but the refinance pool is getting smaller and smaller because most folks already have a super low rate.

That figure is only predicted to go lower in coming years, with $410 billion the expectation in 2018 and $395 billion a year later.

Maybe cash-out refinancing can change things if borrowers begin tapping their equity…

Perhaps this explains the timely launch of Motto Mortgage, which aims to pair mortgage brokers with real estate agents nationwide.

It’s a smart play to get their hands on all that anticipated purchase business instead of focusing on declining refinance volume.

In case you were wondering, the MBA expects 30-year fixed mortgage rates to rise from 3.6% this year to 4.2% next year.

A year later, the 30-year might be pricing closer to 4.6%, before jumping to 5.4% in 2019. Ouch!

Of course, the forecasts for rising interest rates have been wrong year after year lately, so it’s not a foregone conclusion. At the same time, they’ve got to increase eventually, right?

If you’re concerned that might drive home prices lower, it’s not necessarily true. There’s no clear correlation between interest rates and home prices.

The economy is what matters, and if all is good there, real estate should fare well too, even if rates are a lot higher.

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