Research Provides Mixed Projections For Mortgage Market


It’s a mixed bag when it comes to predictions for the mortgage market as the economy continues to balance out after the pandemic.

ATTOM recently held a conference where research performed by their company, Altos Research, and others were compiled to provide a more complete picture of what the remainder of 2023 may look like in terms of new home construction, home sales, and mortgage rates. Inflation, the job market, supply and demand, as well as the steady rising of rates by the Federal Reserve, along with other factors, were taken into account.

Unlike some predictions of 2023 that paint a picture of a distraught housing market, this research shows the year as having mortgage challenges, but also having upsides where people can still buy new homes, invest in properties, and even unload homes while getting a fair profit margin.

Rick Sharga, former executive vice president of market intelligence at ATTOM, said to get a clearer picture of where the mortgage market will be going it’s important to understand how the overall economy got to where it is right now.

“We’ve had a remarkable recovery from the pandemic… We lost 22 million jobs practically overnight, the unemployment rate went upward of 14% nationally and even 15% in some states like California. A lot of the jobs were in the service sector and it was a very unusual recovery that way. But it was an even more unusual recovery in the speed at which the jobs were recovered,” Sharga said.

Sharga went on to say in the history of data, the recovery speed from the pandemic years has not been seen before.

“If you go back to the Great Recession it took us about 10 years, a whole full decade to recover the jobs that were lost in 2008,” said Sharga. “In this case, it took us less than two years to recover all the jobs that were lost. Whether you are looking at current jobless rates or continuous job searchers, those who have looked for but not found work, both of those are back to pre-pandemic levels.”

Even though many of the employment sectors in the U.S. are recovering well from the pandemic, Sharga said the mortgage industry is seeing several issues slowing the so-called “return to normal” after a wild ride the past three years.

“In the mortgage industry, obviously we’ve seen a lot of layoffs,” Sharga said. “We are probably not done seeing layoffs in mortgages because loan volume has really fallen off the cliff, particularly refinance volume.”

Sharga said that job growth may help the housing and mortgage industries get over this hump while the government continues to work to get a handle on inflation.

“There are a lot of professional jobs out there,” Sharga said. “Many managerial, very skilled jobs that are open. So, it is an interesting time in the U.S. economy because we very seldom have more jobs open than we have people looking for work and that has been the case for at least a few quarters now.”

But there are challenges tapping workers for home loans. According to Sharga, even though there are good-paying jobs out there, people are not behaving normally when it comes to budgeting.

While consumer confidence has gone up and spending has soared, savings is at its lowest rate in the U.S. in years.

Sharga added the U.S. is seeing a significant increase in consumer credit use and there is a concern that credit use may be increasing because people are having a tough time making ends meet. They have seen studies that inflation has come down from its high point of over 9% year-over-year but those numbers do not typically include gas prices and food.

Michael Simonsen, president of Altos Research, has been crunching the numbers and believes there are signs of housing market improvements for buyers this season if they can find a home with inventory being so low.

“They’ll have fewer bidding wars, but they will still have less selection than they normally would. This varies a little bit from market to market. If you look nationally, we have 30% fewer homes on the market since 2019,” Simonsen said.

Simonsen added foreclosures will continue to impact the housing market, but not necessarily in a bad way.

“While foreclosure activity is gradually working its way back up to normal levels, were are likely to see fewer repossessions in the coming cycles that we have seen in the past cycles,” Simonsen said. “This also protects home prices. The fewer of the bank-owned homes you have on the market at a discount, the less of a drag there is on the other properties in communities and neighborhoods.”

Foreclosure activity started to stabilize in February after 21 months of increases, according to a press release from ATTOM.

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