Mortgage Market: MBA Predicts Rise in Origination, Mild Recession for 2024
The Mortgage Bankers Association (MBA) has unveiled its projections for the mortgage market in 2024, anticipating several significant changes. According to the MBA’s forecast, total mortgage origination is expected to rise to $1.95 trillion, a notable increase from the projected $1.64 trillion in 2023. This boost is indicative of a thriving mortgage market on the horizon.
One of the key highlights of the forecast is the prediction of an 11% increase in purchase originations, totaling $1.47 trillion in the coming year. Furthermore, the MBA anticipates a substantial surge in mortgage origination volume by loan count, with an expected rise of 19%. This surge will result in 5.2 million loans in 2024, compared to the estimated 4.4 million loans in 2023. These promising numbers were presented during the MBA’s 2023 Annual Convention & Expo held in Philadelphia.
However, amidst this positive outlook, Mike Fratantoni, MBA’s Chief Economist and Senior Vice President for Research and Industry Technology, sounded a note of caution. He warned that a combination of elevated interest rates, stricter credit conditions, and the depletion of pandemic-era household savings could lead to a mild recession in the first half of 2024.
Fratantoni explained the contributing factors, stating, “Both fiscal and monetary policies have contributed to the much higher level of mortgage rates in 2023.” He noted that while the Federal Reserve’s tightening cycle may be approaching its conclusion, the timing and pace of rate cuts may not align with previous expectations. Nevertheless, lower interest rates are expected to stimulate homebuyer demand and contribute to an increase in the inventory of existing homes, thereby supporting purchase origination volume in 2024.
As the economic landscape evolves, Fratantoni also pointed out that the job market may experience a slowdown in 2024, with fewer job additions. The unemployment rate is projected to rise from its current level of 3.8% to 5% by the end of 2024. In addition, inflation, which has been a significant concern, is expected to gradually decline toward the Federal Reserve’s target of 2% by mid-2025.
In summary, the MBA’s forecast for 2024 paints a picture of a robust mortgage market with increased origination, particularly in the purchase sector. However, the warning of a mild recession underscores the need for vigilance and adaptability in response to evolving economic conditions.
