New Information: Mortgage Bankers Association predicts Modest Increase in Purchase Volume Next Year Gas price decrease sets the stage for higher buyer confidence


MBA: A Modest Increase in Purchase Volume Next Year

Mortgage Bankers Association (MBA) Chief Economist Mike Fratantoni said there will be a little upswing in the purchase market in 2023 despite the mortgage industry coming off of two record-setting years and being in a downturn.

Fratantoni made predictions while speaking at a convention in Washington, D.C. He predicted that the volume of purchase mortgages would increase by 4% from $1.638 trillion this year to $1.704 trillion next year. However, the refinancing volume will decrease by 24%, from $706 million to $540 million. He added that the total mortgage market would shrink from the anticipated $2.3 trillion this year to $2.2 trillion.

Fratantoni explained that the entire property market had been highly competitive and pricey this year. He did, however, state that younger customers will have benefits.

Previously buyers had to contend with “ten to fifteen competing offers” the previous year, but now they might be the only ones putting in a bid, according to Fratantoni.

Lower Gas Prices Push Consumer Confidence To Highest Level Since May

August saw a recovery in consumer confidence after three months of declining mood due to lower gas prices. Although positive, lingering concerns that the U.S. economy may enter a recession have dampened this gain.

The monthly snapshot of consumer attitudes published by the Conference Board increased from July’s downwardly revised 95.3 to 103.2. The headline index broke 100, the historical baseline statistic, in August for the first time since May, matching the level it had attained at that time.

“In the first half of the year, there were shocks to consumers from gas prices, the stock market, and mortgage rates,” said Bill Adams, chief economist at Comerica Bank. “Consumers look very reassured that the direction has stopped getting worse.”

According to the survey, Americans are less apprehensive about the economy’s present and future state. The present situation index, which gauges how individuals feel about the state of the economy and labor market, increased from 139.7 to 145.4 from the previous month. The recovery is linked to the decline in gas prices, which have dropped by more than a dollar a gallon from their mid-June peak to a nationwide average of less than $4, according to Ian Shepherdson, chief economist at Pantheon Macroeconomics.

Housing Market ‘Weakening Sharply’ From April’s Peak

The numbers: The increase in the S&P CoreLogic Case-Shiller 20-city house price index year-over-year fell to 18.6% in June from 20.5% in May. The 20-city index rose seasonally adjusted 0.4% in June, compared to 1.3% in May. The rate of price increases has significantly decreased since spiking at 21.2% in April. The national index, a more comprehensive measurement of home prices, increased 0.3% from May to June after being seasonally adjusted. The monthly growth in June was the smallest in the previous two years.

The South and Southeast witnessed the greatest price surge, with an increase of nearly 29%. Among the 20 cities, Tampa, Miami, and Dallas posted the most significant gains in June. The least significant annual gains were recorded in Cleveland, Minneapolis, and Washington, D.C. However, housing values in these areas increased nonetheless.

Big Picture: Both economists and real estate firms have emphasized that the price growth rate has significantly slowed. Additionally, the prices of an increasing number of homes currently on the market in epidemic boomtowns are being lowered – due in part to buyers’ hesitation to buy, given the upward trend in mortgage rates.

According to Craig J. Lazzara, managing director at S&P DJI, the growth rate in June was at or above the 95th percentile of prior price increases. Moreover, S&P emphasized that the rate of price growth was still strong. Prices have increased by 10.6% in the first half of the year, a pace of increase that has only been attained four times in the previous 35 years.

Next week’s potential market-moving reports are:

  • Monday, September 5th – No Reports
  • Tuesday, September 6th – ISM Services Index
  • Wednesday, September 7th – Cleveland Fed President Speaks, International Trade Balance
  • Thursday, September 8th – Initial Jobless Claims, Construction Spending, Consumer Credit
  • Friday, September 9th – Wholesale Inventories Revision

As your mortgage and real estate professional, I am happy to assist you with any information you may need regarding mortgage or real estate trends. I welcome the opportunity to serve you in any way I possibly can. Please feel free to reach me at (800) 216-1047.

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Single-Family Construction Spending Rose by One-Third Last Year, what does this mean to us average folks today

Rising Rates Propel Surge in Refinancing

The week of January 28th had the highest non-holiday-related increase in mortgage volume since the last week of March 2020, after a 7% drop the previous week. According to the Mortgage Bankers Association (MBA), its Market Composite Index, which measures mortgage loan application volume, jumped 10.0 percent from a week earlier. 

The Refinance Index gained 18 percent from the previous week. Refinancing accounted for 57.3 percent of applications, up from a 55.8 percent share the last week.  It appears that the recent rise in mortgage rates has spurred a new round of homeowners rushing to take advantage of the still-low rates before they increase further.

Single-Family Construction Spending Rose by One-Third Last Year

In 2021, construction spending reached $1.599 trillion, up 8.2% over the previous year’s $1.470 trillion. With a 22.9 percent increase, public and private residential expenditures were the only sectors with double-digit growth, while several other categories saw spending decline.

According to the US Census Bureau, all types of construction investment increased by 0.2 percent in December from November to $1.640 trillion, up 9.0 percent over the previous month. 

There was strong growth of spending on single-family and multifamily construction, while spending on improvements slipped. Single-family construction spending increased to a $435 billion annual pace in December, up by 2.1 percent over the upwardly revised November estimates,” said Na Zhao, an analyst with the National Association of Home Builders (NAHB).

Home Price Appreciation Update Including 2022 Forecast

In the 12 months ending in 2021, home prices increased by 15% year over year, compared to a 6.0 percent increase in 2020. Compared to the previous December, CoreLogic’s Home Price Index (HPI) was up 18.5 percent.

This year’s price projection from CoreLogic predicts a ten percent increase in the first three months, followed by a gradual decline to 3.5 percent by December 2022. After that, on average, the increase will be 9.6% per year. 

At 28.4 percent, Arizona is still the state with the most significant increase, followed by Florida at 27.1 percent and Utah at 25.2 percent. At 37.6 percent and 35.7 percent, respectively, two Florida communities, Naples and Punta Gorda saw the highest gains among metro regions.

Next week’s potential market moving reports are:

  • Monday, February 7th – Consumer Credit      
  • Tuesday, February 8th – Small Business Index, Real Household Debt
  • Wednesday, February 9th – Wholesale Inventories
  • Thursday, February 10th – Initial Jobless Claims, Continuing Jobless Claims, Federal Budget
  • Friday, February 11th – Consumer Sentiment Index, 5-Year Inflation Expectations

As your mortgage and real estate professional, I am happy to assist you with any information you may need regarding mortgage or real estate trends.  I welcome the opportunity to serve you in any way I possibly can. Please feel free to reach me at (800) 216-1047.

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Is Now An Opportune Time For You To Upgrade Your Home Such as Adding A Rental Unit or Other Improvements To Your Property?

With property values continuing to rise in nearly every California neighborhood, adding an accessory dwelling unit (ADU) continues to be way to increase the living space in your property and potentially increase the value of your home. So, is this the year you decide to make a big change and add an ADU to your property? Could you convert your garage to additional living space, add a “granny flat” or otherwise expand your home?

Decide what your goals will be for the ADU

Before you start the process of planning an ADU, getting the required permits, and obtaining financing, decide why you want to add it in the first place. Do you have family members who will move in once you have space for them? Or is your family crowded already, and could use the extra space? Each situation dictates a different timeline.

If you’re planning to add an ADU and use it as a rental, are you in financial need, or are your plans more along the lines of increasing your property value over the longer term? If you’re looking to increase your property’s value with an ADU, your project may not be as urgent as one which will accommodate family members or serve as a rental.

Your home value vs. the cost of the ADU

According to Zillow, home sale prices in the Los Angeles-Long Beach-Anaheim metro area are going to increase about 1.4% in 2020. This isn’t quite as much as Los Angeles proper, where home values are set to increase by 3.5%. With median sales prices in the metro area of $443 per square foot compared to the average cost of building an ADU at about $300 per square foot, you will increase your home’s value by about 50% — on average. ADU projects can vary in cost and benefit to your property, so all of these calculations can change.

Interest rates are predicted to hold steady for 2020

Fannie Mae, Freddie Mac, and other home loan corporations predict that interest rates will probably hold steady in the year to come. If you want to increase the space your home has for your family or add value to your property, 2020 can be an excellent year to start a home renovation project adding an ADU. Work with an experienced home lending professional to learn what your options are in an ADU.


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