Breaking Records: U.S. Mortgage Originations Expected to Hit $1.95 Trillion by 2024

According to the Mortgage Bankers Association, U.S. mortgage origination volume is forecasted to hit $1.95 trillion by 2024. Learn more about the projected surge in mortgage originations and the contributing factors driving this growth.

According to the Mortgage Bankers Association (MBA), the United States is expected to witness a surge in mortgage origination volume in the coming years. Projections indicate that by 2024, the total mortgage origination volume is anticipated to reach a staggering $1.95 trillion, exhibiting an increase from the estimated $1.64 trillion expected in 2023. This growth is primarily fueled by an anticipated 11 percent rise in purchase originations, which are projected to reach $1.47 trillion.

Breaking Records: U.S. Mortgage Originations Expected to Hit $1.95 Trillion by 2024 | ogusyis

In terms of loan count, the MBA estimates that the total mortgage origination volume will grow by 19 percent, from an estimated 4.4 million loans in 2023 to 5.2 million loans in 2024. However, alongside this positive forecast, there are concerns regarding the potential impact of higher interest rates, tighter credit conditions, and the depletion of pandemic-era household savings. These factors combined are expected to contribute to a mild recession in the first half of 2024.

Throughout the year 2023, both fiscal and monetary policies have significantly influenced mortgage rates, resulting in an elevated level. While the Federal Reserve's hiking cycle may soon reach its conclusion, there is uncertainty regarding the timeline and pace of rate cuts. Although it is anticipated that lower rates will stimulate both homebuyer demand and inventory growth, the mortgage and Treasury rates currently maintain a spread that is approximately 120 basis points wider than usual due to various factors.

Taking these factors into account, the MBA's baseline forecast predicts that mortgage rates will end 2024 at 6.1 percent and gradually decrease to 5.5 percent by the end of 2025. This decline is expected as the spread between mortgage and Treasury rates narrows, and Treasury rates themselves decline while the economy slows and inflation decreases.

Nevertheless, the MBA acknowledges that the national housing market will witness growth over the next three years, fueled by limited inventory levels that support price increases. The association emphasizes that first-time homebuyers will play a significant role in driving housing demand as the largest age cohort reaches its prime homeownership years. However, challenges persist, including high median purchase and interest payments, scarcity of for-sale inventory (especially for entry-level homes), and limited credit availability.

Compared to existing-home sales, new home sales have remained robust due to the scarcity of existing home listings and the competitiveness of the bidding process. Recent data from surveys have shown notable year-over-year gains in purchase applications.

On the lender side of the mortgage business, excess capacity remains a hurdle as productivity levels remain low and expenses per loan remain high. While lenders have made efforts to reduce headcounts and overall expenses, the record-low volume continues to drive up costs per loan.

In terms of servicing, the low delinquency and prepayment rates have contributed to an increase in servicing net operating income in 2023. This has allowed many lenders to maintain overall profitability. However, projections suggest that delinquency rates are likely to rise in 2024 as unemployment increases and borrowers face challenges with rising property taxes, insurance costs, and the resumption of student debt payments.

In conclusion, the MBA predicts a significant increase in mortgage origination volume in the coming years, accompanied by various challenges and uncertainties. While home prices are poised to rise, supported by limited inventory, first-time homebuyers will play a crucial role in shaping housing demand. Lenders continue to face struggles with excess capacity, low productivity, and high expenses per loan. Delinquency rates are anticipated to rise as economic conditions change. It is essential for stakeholders in the mortgage industry to remain vigilant and adapt to the evolving landscape.