The purchase market is due for a rebound, according to Joel Kan, Mortgage Bankers Association associate VP of industry surveys and forecasts.
Kan told members of the audience in a QA session at MBA Annual that current macroeconomic trends should create a swell for the purchase market Joel Kan – good news for the flagging mortgage market.
“The forecast is for an increasing purchase market and a declining refinance market,” Kan said.
“We are looking at a growth of 3% or 4% on the purchase side, but a drop in refi as rates increase. With the big refi wave that we had over the last few years, not a lot of borrowers are left in the market to refinance, especially at rates hitting 5%,” he added.
Kan’s rationale for the positive outlook on the purchase market springs from moderating home prices and impending wage growth. He said things are tough right now because home prices have appreciated much more quickly than wages have grown.
The good news is that this trend appears to have peaked as sellers are finally beginning to back off of prices to meet buyers at reasonable price points.
Couple this with a strong job market and the potential for wage growth, and what you have is something that could finally jostle the rocks from the cogs in the mortgage market.
“We have a really strong labor market right now, and we haven’t seen good, solid wage growth in a while, and we do expect that that’s around the corner,” Kan said.
“So, with some home price moderation and some more wage growth picking up, some of that gap is going to be bridged in the coming years, so that is feeding into our expectation for the purchase market,” he added.