Zelman Closest to the Pin for Key National Mortgage Statistics

Friday, May 18, 2018 by Zelman & Associates

Filed under: mortgage

Last week, the Federal Financial Institutions Examination Council (FFIEC) and the Consumer Financial Protection Bureau (CFPB) released preliminary Home Mortgage Disclosure Act (HMDA) data for 2017 mortgage originations. Released earlier than the typical September timeframe, the results are preliminary at this point as some respondents missed the initial deadline and corrections to prior submissions are still possible. Nevertheless, we estimate that the current data account for approximately 90% of all mortgage activity last year.

To best interpret the sample, we analyzed purchase and refinance originations, in both unit and dollar terms, for respondents that completed the survey in 2016 and 2017, and excluded second liens and multi-family originations. We believe that these adjustments make for the most useful comparisons. For purchases, unit originations increased 6%, exactly matching our existing estimate, while the average loan size climbed 3%, leaving dollar originations up 9%. This too met our forecast, which compared to Freddie Mac and the MBA at up 5% and Fannie Mae at up 8%.

For refinancings, unit originations were down 32%, which was weaker than our estimate of a 27% decrease. However, the average loan size was down only 1% versus our negative 5% estimate, leaving dollar originations down 33% in total. This compares to our most recent estimate of a 31% decline versus Fannie Mae at 29%, Freddie Mac at 33% and the MBA at 40%.

In aggregate, 2017 mortgage originations declined 13% in units and 11% in dollars. In our December 2016 macro housing forecasts, we projected an 11% decline in 2017 dollar mortgage originations at a time when the three consensus sources held a more negative outlook for a 20% drop. We largely maintained this estimate through the year while third-party forecasts improved. However, even as of April 2018, the MBA was still estimating a 17% decline from 2016.

While predicting the direction of mortgage originations is a challenging task given the relationship with interest rates, we have found that since launching our mortgage finance forecasts in early 2014, they have been less volatile and more accurate than consensus. As we look toward 2018, the same scenario appears to be unfolding. We began the year looking for 6% growth in total dollar originations, which we trimmed to 3% in March, comparing to consensus at down 5% and 7%, respectively.

The differential between our outlook and consensus equates to approximately $185 billion of mortgage originations. Time will tell if our estimates prove more accurate again, but at this point, we believe that the consensus outlook for refinancings is too negative based on year-to-date trends, and is the most likely source of upside.

Zelman Closest to the Pin for Key National Mortgage Statistics

Looking for More Insightful Content?