Mortgage Industry Update

Economist, Mortgage Bankers Association


At the start of the second quarter of 2017, the Mortgage Bankers Association’s assessment of where the market is and where it will head is little changed from our outlook at the beginning of the year, with a few key differences that are very relevant to investors looking at the housing industry.

MBA continues to forecast that the Federal Reserve’s Federal Open Market Committee (FOMC) will raise rates further this year. But just as importantly, it also remains likely that the committee will begin to allow assets to run off their balance sheet by the end of the year, exerting even more upward pressure on mortgage interest rates. Given the size of the Fed’s holdings and current market conditions, balance sheet runoff could have an even larger impact on mortgage markets than changes in their short-term rate target, bringing additional volatility to an already choppy rate environment.

According to the Bureau of Labor Statistics (BLS), 138,000 jobs were created in the U.S. in May 2017. This brought the year-to-date average monthly employment growth to 162,000 jobs, and lowered the unemployment rate to 4.3 percent, the lowest unemployment rate seen since 2001. In a separate report from the BLS, job openings continue to exceed hiring and voluntary quits remained close to historically high levels. These are signs that the U.S. economy is already below or at full employment, and we expect that the unemployment rate will decrease to 4.1 percent by the end of 2017.

All of that suggests a strong job market capable of support for a strong housing market. MBA is confident that this economy can support our projection of a 9 percent increase in the size of the purchase mortgage market in 2017 over 2016, to a level of almost $1.1 trillion for purchase.

But one factor that may be tempering growth is the relative lack of available housing. For the first time in 2017, MBA’s Builder Applications Survey showed that applications for new homes in April were lower than the same month one year ago. Despite steady demand for housing, homebuilders continue to face rising costs for labor and materials which will continue to moderate the pace of building.

From an Arizona specific perspective, the average loan size for March 2017, the most recent date that data is available came in at $233,590, slightly up from $220,651 the year prior. Year-over-year applications for home mortgage purchase grew 7.2 percent, refinances dropped 30.4 percent and the share of adjustable rate mortgages in Arizona nearly doubled from 3.7 percent to 6.6 percent this year.

Delinquencies fell over 50 basis points in the first quarter of 2017, compared with the fourth quarter of 2016. Only 3.12 percent of loans being serviced in Arizona were delinquent, and only 0.48 percent of loans were in foreclosure, ranking the state 39th in delinquencies and 41st in foreclosure inventory.

As for the national mortgage market picture when we look further ahead into next year – more specifically the end of 2018, the dominant trend we still see is the ongoing shift from a refinance dominated market to a purchase oriented market. Right now, refinances still account for about 40 percent of origination volume, but by the end of 2018 it will be down to around 28 percent. We expect refinance volume to fall further as rates increase, and purchases keep growing with the job market.


For more information on MBA’s Builder Applications Survey, Monthly Profile of State and National Mortgage Activity, National Delinquency Survey, MBA’s Chart of the Week, Economic and Mortgage Finance Forecasts, or other research products, please visit