On Tuesday, the MBA released its forecast of purchase originations—reporting that it expects to see $1.2 trillion in purchase mortgage originations in 2018, representing a 7.3 percent increase from this year.
Additionally, the report predicts refinance originations will decrease by 28.3 percent from 2017, to approximately $430 billion. However, total mortgage originations will decrease to $1.60 trillion in 2018 from $1.69 trillion in 2017, according to the report.
Michael Fratantoni, MBA's Chief Economist and SVP for Research and Industry Technology said they are projecting that home purchase originations will increase at a faster rate in 2018—despite the market being constrained by insufficient supply, with inventories of homes at a low given the home price growth the market experienced.
“The job market remains strong, demographic trends are quite favorable, mortgage credit is becoming more available to qualified borrowers, and home prices should continue to rise,” Fratantoni said. “All the pieces are in place for stronger growth in 2018 and beyond.”
In addition, the projection for overall economic growth is 2.0 percent for 2018, slowing slightly to 1.9 percent in 2019, and 1.8 percent in 2020, according to the report.
"Although inflation remains low, a tight job market is likely to increase inflationary pressures in the near term,” Fratantoni said. “We expect the Fed will raise rates in December 2017, three times in 2018, and twice in 2019.
According to Fratantoni, the Fed has begun reducing its holdings of Treasury securities and mortgage-backed securities, and this will put additional, modest upward pressure on mortgage rates.
Therefore, it is forecasted that the 10-Year Treasury rate will stay below three percent through the end of 2018, and 30-year mortgage rates will stay below 5 percent.