Mortgage Market Set to Reach $2.3 Trillion by 2025, Indicating Strong Recovery

The mortgage industry is poised for a significant rebound, with projections indicating a remarkable $2.3 trillion in origination volume by 2025. This forecast, representing a robust 28.5% growth over 2024, signals that the most challenging times for the sector may be behind us.

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Marina Walsh, Vice President of Industry Analysis, expressed optimism at the recent Mortgage Bankers Association (MBA) Annual Convention. “We’re in a much better place now than a year ago,” she stated, emphasizing that the market is shifting towards purchases rather than a focus on refinancing. “This transition is not without its challenges, but the overall direction is promising.”

In 2025, purchase originations are anticipated to reach $1.45 trillion, a 13% increase from the previous year. Meanwhile, refinancing is expected to account for 37% of total mortgage volume, up from 28% this year. As mortgage rates are projected to drop from an average of 6.3% in 2024 to 5.9% in 2025, this shift could entice more borrowers into the market.

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Mike Fratantoni, the MBA’s Senior Vice President and Chief Economist, noted that recent monetary policy changes, including the first rate cut in September 2024, have positively influenced market sentiment. However, he cautioned that ongoing budget deficits might hinder further rate reductions.

“Recently, we’ve seen an increase in the 10-year Treasury yield, rising from 3.6% to 4.25%. Some of this speculation is tied to the upcoming elections and the potential for a Trump administration,” Fratantoni explained. He indicated that discussions about federal deficits are likely to intensify, regardless of which party takes office.

Despite these concerns, the U.S. job market is expected to slow, with unemployment potentially rising from 4.1% to 4.7% by the end of 2025. However, inflation is forecasted to gradually decline toward the Federal Reserve’s 2% target, providing a more stable economic environment.

Joel Kan, MBA’s Vice President and Deputy Chief Economist, shared insights on the anticipated increase in mortgage origination volume, predicting a total of 6.5 million loans in 2025, compared to 5.1 million this year. “The good news is that mortgage rates are lower than last year, and inventory for homes has started to grow,” Kan noted.

First-time homebuyers are increasingly turning to newly built homes as an option, which could further boost market activity. “Over the past few years, we’ve seen a significant drop in available homes, averaging just 1.6 million units. Recently, however, that number has increased to around 1.8 million units,” Kan added.

As we look ahead to 2025, these trends point to a healthier mortgage market, with the potential for more robust purchase activity if mortgage rates remain stable or decline further.

For more updates on the mortgage and housing market, stay tuned to iShookFinance.com.

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