Doug Duncan, SVP and Chief Economist at Fannie Mae said, “While 2018 is likely to end up a disappointing year for the housing and mortgage industries, continued strength in demographics and the labor market offers hope that conditions should stabilize and may even improve next year."
Quoting a mortgage lender survey, Fannie Mae stated that the profit outlook for mortgage lenders fell for the ninth consecutive quarter between October and November, as a result of declining demand for loans to buy homes and refinance existing mortgages.
Duncan pointed out that stressful conditions hang over the mortgage industry as lenders report the lowest purchase mortgage demand expectations across all types of loans. He also noted that the refinance demand expectation for GSE-eligible loans is abysmal—establishing the lowest record in the survey's five-year history.
Fannie Mae’s Q4 2018 Mortgage Lender Sentiment Survey found that outlook for profit among lenders in the fourth quarter reached an all-time survey low across all loan types – GSE-eligible, non-GSE-eligible, and government. Respondents cited competition from other lenders as the top reason for their pessimism for the eighth consecutive quarter. Consumer demand was listed as the second most important reason for decreased profit margin outlook, which also reached a survey high.
Speaking of homebuying trends, Duncan said, "Rising mortgage rates and lean inventory amid solid home price appreciation have discouraged both first-time and trade-up homebuyers.
However, mortgage rates have shown signs of stabilization, and annual home price gains have slowed from the red-hot pace seen earlier this year.”
The report also found that lenders continued to ease credit standards at a modest pace since the beginning of 2018, however, at a significantly slower compared to last year. Expectations on easing lending standards remain steady since 2017 up until from Q4 2018.