Increase in Home Purchases
Every industry expert whose opinions we looked at agreed: Purchase mortgage
volume will increase in 2018. In fact, Michael Fratantoni, chief economist and
senior vice president of research and technology of the Mortgage Bankers
Association (MBA), expects purchase growth through 2020. Freddie Mac's Economic
and Housing Research Group (EHRG) has predicted growth of about 2% next year in
both new and existing home sales. While refinancing has been strong recently,
we're now seeing a slow shift to a purchase-oriented mortgage market. Which
leads us to ...
Decline in Refinancing
EHRG, Realtor Magazine, MBA, Moody's, and Fannie and Freddie are all looking
for refinance activity to decline next year, although CoreLogic is estimating
that 250,000 FHA mortgagees could refinance into conventional loans in 2018.
This could help borrowers cut monthly payments by canceling FHA annual
insurance.
EHRG does predict cash-out refinances to climb to a larger percentage of the
refinance market, although EHRG and Realtor Magazine both predict refinances
overall will decline to 25% of the mortgage market, the lowest percentage since
1990. Rising interest rates will contribute to the drop in refinancing,
according to MBA's Fratantoni.
Rise in Interest Rates
Speaking of rising interest rates, economists at the MBA predict mortgage
interest rates on 30-year fixed-rate loans to rise to 4.6% in 2018, and to more
than 5% in 2019. The Federal Housing Finance Agency (FHFA) agrees that rates
will hit the mid-4% range next year and mid- to upper 5% range by 2020.
Inventory Issues
Low inventory across the country will continue to remain a challenge for
homebuyers in 2018. Experts state that low new housing starts and soaring
prices are keeping purchase numbers down. First-time buyers and millennials are
the most impacted by the lack of affordable housing. As more homeowners see the
difficulties of affording a new home in this climate, they may choose to stay
in their current homes longer, which will also impact inventory. Based on a recent
survey, Zillow predicts that the shortage of affordable homes will also push
housing prices to climb more than 4% in 2018, exacerbating the problem and
forcing millennials to remain renters.
Increase in Home Purchases
Every industry expert whose opinions we looked at agreed: Purchase mortgage volume will increase in 2018. In fact, Michael Fratantoni, chief economist and senior vice president of research and technology of the Mortgage Bankers Association (MBA), expects purchase growth through 2020. Freddie Mac's Economic and Housing Research Group (EHRG) has predicted growth of about 2% next year in both new and existing home sales. While refinancing has been strong recently, we're now seeing a slow shift to a purchase-oriented mortgage market.
Information courtesy of Steve Tedrow, Windermere Mortgage Services. |
