The confidence given to consumers by a strong US economy, low unemployment, and bigger pay checks will see a boost for homebuying.
The Mortgage Bankers Association is forecasting that residential purchase mortgage originations will grow 4.2% year-over-year in 2019 to reach $1.2 trillion as demand for homes grows.
At its 2018 Annual Convention and Expo in Washington, D.C., the MBA also predicted a decrease for refinance originations of 12.4% to $395 billion.
The MBA is predicting that there will be three interest rate rises from the Fed in 2019 following one in December 2018, leading to mortgage rates averaging around 5.1%.
“While the Federal Reserve is expected to increase short-term rates further, 30-year mortgage rates should rise only modestly from here," said Mike Fratantoni, MBA chief economist and senior vice president for research and industry technology. "We are seeing some deceleration in the rate of home price growth but believe this is a healthy pause for the market, as it will allow income growth to catch up to the recent run-up in home values."
Fratantoni added that he expects increased housing demand through 2021 with pace growing as more millennials hit the home buying market.
Challenges remain for mortgage industry
Despite the positive outlook, Fratantoni also highlighted continuing issues for the mortgage industry.
"While the macroeconomic and housing market backdrops are, and should remain quite favorable, the mortgage industry continues to be challenged by the drop in origination volume, coupled with significant margin compression," said Fratantoni. "Lenders of all types and sizes are seeing elevated costs, coupled with intensely competitive pricing, to capture more volume. This in turn is depressing revenues."