The most challenging time in the mortgage industry seems to be in the rear view mirror, as Mortgage Bankers Association (MBA) predicts $2.3 billion in initial volume by 2025—representing strong growth of 28.5% by 2024.
“We are in a much better place now than last year. Let’s keep that in mind when looking at this data. Looking at the origin forecast, the trajectory is high,” said Marina Walsh, vice president of industry analysis, at the 2024 MBA Annual Conference and Expo in Denver on Sunday. “It’s definitely a buying market, not a refis market. It won’t be easy, but again, we are heading in the right direction.”
Purchase originations are predicted to rise to $1.45 trillion by 2025, an increase of 13% year over year. Meanwhile, with 30-year mortgage rates expected to decline from an average of 6.3% in 2024 to 5.9% in 2025, refis are estimated to represent 37% of volume next year, up from 28 % this year.
Mike Fratantoni, MBA’s senior vice president and chief economist, said monetary policy “changed with the first rate cut in September 2024.” However, there is a risk that “growing budget deficits will keep long-term rates very low.”
“We saw an increase in the 10-year Treasury yield, which was as low as 3.6%, now it has reached 4.25%. “The speculation is that at least some of the drivers here are market participants who think that the problems of the Trump administration, and especially the possibility of a red tide, have increased significantly, and that may be putting upward pressure on prices,” Fratantoni. said.
The explanation is that, based on the measurements from the Committee on a Responsible Government Budget compared to the proposals of Donald Trump and Kamala Harris, there will be huge deficits under the Trump administration. However, according to Fratantoni, regardless of who wins this election, “you’re going to hear a lot about this deficit and debt picture going forward.”
Another factor in the background is that global growth will be anemic in 2025, raising concerns “that we may be stuck in a low-growth, high-debt pattern,” he added. In the US, the job market may slow, with the unemployment rate rising from 4.1% to 4.7% by the end of 2025. Inflation will gradually decline to the Fed’s 2% target by the end of 2025.
“Expectations of further rate cuts have been factored into mortgage rates, and we expect mortgage rates to remain in the narrow range of around 6% for the foreseeable future,” Fratantoni said.
Joel Kan, vice president and deputy chief economist at MBA, said that, by loan calculation, the number of loans is expected to increase by 28% to 6.5 million loans by 2025, compared to 5.1 million loans this year.
According to Kan, mortgage rates are lower than last year, real estate prices have grown slightly, and first-time home buyers are turning to newly constructed homes as an option.
“If you go back to the decade from 2000 to 2009, we had about 3.1 million units sold during that time. In the next ten years, we were around 2.4 million, and in the most recent four years so far, we are around 1.6 million,” said Kan. “The good news here is that we saw an increase in the last two months to about 1.8 million units.”
Kan added: “These factors should support significant gains in buying activity early next year, especially if mortgage rates remain close to these levels or decline further.”
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