Real Estate News

More mortgage lending coming next year

Published: 30 Oct 2017

The housing sector has been in good shape for most of 2017 thanks to a combination of significant interest among would-be buyers coming into the market and low interest rates that keep refinancing affordable for the relatively small number of owners who had yet to cut their costs. And while rates are slated to rise - even before the end of the year - it seems that this won't dampen mortgage origination heading into 2018.

Indeed, total purchase originations will likely rise to $1.2 trillion next year, according to the latest data from the Mortgage Bankers Association. That's up 7.3 percent from the level seen this year, and will mostly help to offset a significant decline in refinancing expected as mortgage rates rise throughout 2018, which should slip more than 28 percent to just $430 billion.

Looking even farther into the future, purchase originations should rise to $1.24 trillion in 2019, while refinances fall by another $35 billion to $395 billion, the MBA said.

"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."

More people are likely to buy homes next year.More people are likely to buy homes next year.

What that supply issue means
While purchase originations will likely grow in the next two years, recent data from Freddie Mac shows that a lack of available homes for sale is really holding back many would-be buyers. While about 40 percent of renters say they're unsatisfied with the experience, about 1 in 3 say they don't think buying a home is a priority right now. Furthermore, only 15 percent believe buying a home will be affordable for them in the next 12 months, while more than half say they're running into difficulties finding affordable homes up for sale.

David Brickman, executive vice president and head of Freddie Mac Multifamily, noted that these issues in the housing market will probably keep the multifamily housing market going strong into next year.

The MBA agrees
Indeed, commercial and multifamily mortgage originations are likely to rise about 5 percent by the end of this year (in comparison with 2016) and that growth should continue into 2018 as well, according to additional projections from the MBA. Property values are up 6 percent nationally through the end of August and multifamily and commercial originations grew 15 percent through the end of the first half of 2017.

With these issues in mind, any extra effort would-be buyers can make to improve their finances over the next several months and beyond will likely go a long way. Carrying a higher credit score and building the size of a down payment can help to unlock greater affordability, even as competition remains fierce.