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Mortgage lending expected to grow in 2018

November 7, 2017

There was growth in mortgage origination over the course of 2017 due to both more demand for homebuying, and rates staying low enough to keep incentivizing refinance activity among current homeowners. That was encouraging news for the mortgage market overall, but experts now believe the positives will continue into 2018 and beyond, even as affordability declines.

"Home purchases are expected to rise in 2018."

Homebuyers will likely keep the overall home loan marketplace going strong even as refinances take a step back, according to new projections from the Mortgage Bankers Association. Originations on home purchases are expected to rise to $1.2 trillion in 2018, and $1.24 trillion in 2019, despite refinances taking a bit of a step back. Indeed, the total value of refinance mortgage originations is projected to drop by more than 28 percent next year, to just $430 billion, then fall again the following year to $395 billion.

"We are projecting that home purchase originations will increase at a faster clip in 2018, nearly double the rate that they increased in 2017," said Michael Fratantoni, MBA's chief economist and senior vice president for research and industry technology. "The housing market has been hamstrung by insufficient supply, with inventories of homes remarkably low given the home price growth we have 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. All the pieces are in place for stronger growth in 2018 and beyond."

Another type of originations could grow as well
Meanwhile, mortgages for multi-family housing are likewise expected to increase for next year, though likely not quite at the rate seen this year, the MBA reported separately. Through the end of 2017, origination volume on multi-family home loans should come to $271 billion, and grow slightly for 2018.

"Property values had grown 6% on an annual basis."

Jamie Woodwell, vice president of commercial real estate research at the MBA, noted that property values had grown 6 percent on an annual basis through the end of August, and stronger economic conditions and capital availability should push such originations forward at least a little bit into next year.

Affordable rentals declining
At the same time, new data from Freddie Mac shows more people could be looking to buy in the near future simply because the cost of renting continues to rise. About 2 in 5 people who rent say their experience doing so has been unsatisfactory. However, relatively few have plans to buy right now, as more than half said the lack of affordable homes in their areas is keeping them in the rental market instead.

This serves to highlight a lot of the pressures young adults now face as they try to build their credit backgrounds and down payments. While many may want to buy - and more will be in a position to do so over the next two years - the fact remains  other hurdles in the housing market overall could remain potentially problematic even as conditions continue to improve.




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