Economic & Housing Market Themes and Outlook
Q3 2022 Research and Insights
- Rapid economic growth in 2021, but growth now slowing due to fiscal, monetary and inflationary drags with high prospect of a recession in 2023.
- Labor market starting to moderate even as unemployment rate is close to 50-year low.
- Inflation surges with the rotation of consumer spending into services aiding in inflation broadening and becoming more persistent.
Housing & Mortgage Market Outlook
- Housing demand hit hard by worsening affordability; risks remain on downside as buyers may choose to wait and see.
- Mortgage rates increase at the fastest pace in 40 years.
- Sales of existing homes are plunging and down 24% from a year ago and down 14% compared to pre-pandemic in August 2019.
- Mortgage applications are down around 50% from their peak, and 33% compared to 2019’s average, suggesting further softening in sales coming.
- While inventory has increased, it remains low by historical standards.
- Month-over-month home price growth appears to be slightly negative overall, with pronounced weakness out West.
Distress Supply, Delinquencies & Foreclosures
- Mortgage Delinquencies and Foreclosures ticking up slightly.
Fourth Quarterly Forecast Released on October 21, 2022
- The 30-year fixed-rate mortgage (FRM) is expected to average 5.4% in 2022 and 6.4% in 2023. In 2021, the 30-year FRM averaged 3%.
- House price growth is expected to average 6.7% in 2022, declining to -0.2% in 2023. House price growth was 17.8% in 2021.
- Home sales are expected to be 5.8 million in 2022, declining to 5.1 million in 2023. Home sales were 6.9 million in 2021.
- Home purchase mortgage volumes are expected to increase $1.8 trillion in 2022 slowing to $1.6 trillion in 2023. Purchase originations were $2 trillion in 2021.
- Refinance originations are expected to decline to $0.7 trillion in 2022, slowing further down to $0.3 trillion in 2023. Refinance originations were $2.8 trillion in 2021.
- Overall, annual mortgage origination levels are expected to be $2.6 trillion in 2022, and $1.9 trillion in 2023, down from $4.8 trillion in 2021.