iEmergent's 2017-2018 Mortgage Opportunity Forecast

iEmergent's updated 2017-2018 forecast is complete. Learn what's forthcoming for the U.S. mortgage market.

Halfway through 2017, our slow but lengthy recovery chugs on, while Congress struggles to make headway on the Trump administration’s fiscal policy initiatives. Healthcare reform efforts have stalled; tax reform efforts have only recently begun to show signs of progress; and infrastructure investment plans seem nearly forgotten. However, the economic situation is generally good.

• While Q1 real GDP only grew an anemic 1.2%, the early estimate for Q2 is up 2.6%, led by rising consumer consumption. This is now the third longest expansion since WWII, although it is the slowest in terms of average quarterly growth.
• Job growth continues to be solid, although wage growth has been slower than expected.
• Inflationary pressures are nil, with recent declines in both CPI and PCE deflator indexes.
• Stock market indexes continue to hit new highs, while consumer and business confidence indicators remain elevated.
• Housing market indicators continue to be mixed.  New construction is still sluggish, but sales are up relative to last year despite continued low inventory and strong home price appreciation.
• Delinquency and foreclosure rates continue their slow, steady improvement.
• Household balance sheets continue to improve, with home equity and stock market gains raising net worth.

For the mortgage market, the 2017 outlook looks a bit better than expected.  Lack of progress on fiscal stimulus, as well as slow GDP growth, have meant less upward pressure on bond yields, which have trended down since January.  While the refinance market will still decline sharply from 2016, moderating mortgage interest rates will soften that decline, so we’ve raised our refinance outlook slightly.

Our 2017-18 purchase market outlook also appears brighter.  The steady economy, healthy labor market, still low mortgage rates, and stronger household balance sheets all improve the potential for more home purchase originations.  Our 2017 purchase forecast is now $1.09 trillion, revised upward from our previous forecast of $1.03 trillion.  We project that the increase in purchase originations will continue, reaching slightly over $1.2 trillion in 2018.

Overall, we predict a 2017 mortgage origination market of $1.61 to $1.74 trillion – a smaller decline than previously expected – but still a substantial drop from 2016. Refinance activity will continue to decline in 2018; however, a continued increase in purchase mortgages will combine to reach total originations between $1.63 to $1.74 trillion.