Mortgage industry needs to cut headcount by another 25-30%

The mortgage industry needs to squeeze out more capacity to get where it needs to be to operate profitably.

Based on a variety of data sources, including their own Weekly Applications Survey, Walsh and her colleagues determined that they were “about a third of the way to their goal and still have a long way to go.”

The market will peak in the fourth quarter of 2020 and bottom out this quarter. Based on Origination projections, “we think there’s about 25-30% in terms of capacity that needs to be squeezed out,” Walsh explained.

According to MBA, the mortgage industry will issue a total of 13.55 million units in 2021. 5.94 million this year, next year he will decrease to 4.96 million, and in 2024 he will recover to 5.61 million, and in 2025 he will recover to 5.96 million.

Meanwhile, based on profitability data reported to date, independent mortgage banks are likely to report losses on origination activity throughout the year for the first time since 2022, Walsh said.

After pointing out the possibility of a recession earlier this year.”coin flipThe MBA’s chief economist, Mike Fratantoni, has clearly predicted that the United States will enter a recession next year.

“The potential benefit for the industry is likely to lower interest rates a bit,” he commented. .

Fratantoni bases its forecast on signs of a “significant softening” in the job market.

“This recession we are about to experience is certainly likely to be relatively shallow and relatively mild compared to what we experienced in 2008-2009,” Fratantoni said at the time. , the unemployment rate had reached close to 10%. About 5% this time.

In addition, household savings generated by massive refinancing that cut mortgage payments have established buffers for many families, leaving them with low debt service.

“The housing market really led us into the last 23 years of recession,” said Fratantoni. “I think the housing market will also lead us.”

House price growth is expected to moderate in 2023 and 2024, but the silver lining is allowing household incomes to keep up with property prices, said deputy chief economist Joel Kan. .

The MBA’s October forecast forecasts that this year’s volume will drop 9% to $2.47 trillion next year, at $2.257 trillion, before recovering to $2.311 trillion in 2024.

these are Forecast for September $2.324 trillion in 2022, $2.244 trillion in 2023, $2.501 trillion in 2024.

Freddie Mac released its third-quarter industry forecast on October 21, with total output expected to reach $2.595 trillion in 2022. But the outlook for next year is more bearish than either MBA, at just $1.945 trillion.

fannie mae Forecast for October We needed $2.33 trillion in trading volume this year and $1.735 trillion in 2023.

“Mortgage rates rose at the fastest pace in 40 years, rapidly blowing the wind out of the housing market’s sails,” Freddie Mac chief economist Sam Cater said in a press release. Higher interest rates have created affordability issues due to widening mortgage spreads, which has delayed many consumers’ home-buying decisions.”

Rising interest rates should gradually increase the inventory of homes for sale. “The combination of much lower demand and higher supply will drive home prices down over the next year,” he said.

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