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MBA Economic and Mortgage Finance Outlook Prepared for Capital Markets Cooperative
September 6, 2018
Presented by
Mike Fratantoni Mortgage Bankers Association
Marina Walsh Mortgage Bankers Association
Single Family Origination Volume Through the Cycle
Source: MBA Forecast
459563
8931,020
769640
785833
1,656
1,3791,139
2,243
2,854
3,812
2,773
3,027
2,726
2,306
1,509
1,995
1,698
1,436
2,0441,845
1,261
1,679
2,051
1,7101,606
1,5921,631
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
1990199119921993199419951996199719981999200020012002200320042005200620072008200920102011201220132014201520162017201820192020
MortgageOriginationsHistoryandForecast
Total Refi Purchase
$Billions
MBA Forecast Summary
Source: MBA Forecast
2017 2018 2019 2020
GDP Growth 2.6% 3.0% 2.3% 1.5%Inflation 2.1% 2.6% 2.4% 2.4%Unemployment 4.4% 3.9% 3.6% 3.8%Fed Funds 1.375% 2.375% 3.125% 3.125%10-year Treasury 2.4% 3.1% 3.4% 3.4%30-year Mortgage 3.9% 4.8% 5.2% 5.3%New home sales (000s) 617 643 661 673 Existing home sales (000s) 5,542 5,439 5,560 5,643 Purchase originations ($B) 1,110 1,149 1,197 1,236 Refi originations ($ B) 600 457 395 395 Total originations ($B) 1,710 1,606 1,592 1,631 Mortgage debt outstanding ($B) 10,010 10,370 10,760 11,130
Job Growth Unexpectedly Strong
Source: BLS 4
254 265
162
(144)
(43)
10
170 210
175
96
(297)
(422)
88
174 179 192
250 226
195 182 176
324
155 175
268 248
157
(500)
(400)
(300)
(200)
(100)
-
100
200
300
400
Thou
sand
s of
jobs
Monthly Payroll Growth
Unemployment and Participation Low
Source: BLS 5
62.0
62.5
63.0
63.5
64.0
64.5
65.0
65.5
66.0
66.5
67.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
Part
icip
atio
n R
ate
Une
mpl
oym
ent/u
nder
utili
zatio
n R
ate
Unemployment and Labor Force Participation
Civilian Participation Rate: 16 yr + (SA, %) Civilian Unemployment Rate: 16 yr + (SA, %)
Unempl+Margin Attach+Part Time Econ Reasons/CLF + Margin Attach (SA,%)
Compositional Changes Holding Down Wage Growth
Source: BLS 6
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
Jan-06
Apr-06
Jul-0
6Oct-06
Jan-07
Apr-07
Jul-0
7Oct-07
Jan-08
Apr-08
Jul-0
8Oct-08
Jan-09
Apr-09
Jul-0
9Oct-09
Jan-10
Apr-10
Jul-1
0Oct-10
Jan-11
Apr-11
Jul-1
1Oct-11
Jan-12
Apr-12
Jul-1
2Oct-12
Jan-13
Apr-13
Jul-1
3Oct-13
Jan-14
Apr-14
Jul-1
4Oct-14
Jan-15
Apr-15
Jul-1
5Oct-15
Jan-16
Apr-16
Jul-1
6Oct-16
Jan-17
Apr-17
Jul-1
7Oct-17
Jan-18
Apr-18
Jul-1
8
UnemploymentRateByEducationalAttainment
College <Bachelors HighSchDiploma <HSDiploma
Core Inflation Stepping Up
Source: BLS 7
2.4
2.9
(1.0)
(0.5)
-
0.5
1.0
1.5
2.0
2.5
3.0
3.5
Jan-14
Mar-14
May-14
Jul-1
4
Sep-14
Nov-14
Jan-15
Mar-15
May-15
Jul-1
5
Sep-15
Nov-15
Jan-16
Mar-16
May-16
Jul-1
6
Sep-16
Nov-16
Jan-17
Mar-17
May-17
Jul-1
7
Sep-17
Nov-17
Jan-18
Mar-18
May-18
Jul-1
8
ConsumerPriceIndexYearoveryearpercentchange
AllItemsexc.Food&Energy AllItems
Global Yields Have Started to Increase
Source: Thomson Reuters 8
Trade Tensions…What is the Impact?
9
Economic Growth and Rates – What’s Next?
Rates Expected to Increase
Source: Federal Reserve, Freddie Mac, MBA 11
How High Will the Fed Go?
12
Millennials Hitting Peak Housing Demand Years
4.7
3.9
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100+
Avg=4.3
Millions
Born 1980 or later Born 1966-80 Born 1948-65 Born 1947 or earlier H
eads
hip
rate
s in
crea
se fr
om 1
5% to
45%
13 Source: Census Bureau
-3
-2
-1
0
1
2
3
4
18-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-70 70-75 75-80 80+
Mill
ions
ProjectedChangesinHouseholds,byAge2014-2024
Non-Hisp. White Black Asian Other Hispanic
Using Forecasted Headship Rates
Potential for 16 Million Additional Households by 2024 Changing Demographics and Economy Plus Trends
Source: IPUMS CPS and MBA
+12.9 million
- 2.1 million
+5.1 million
14
Purchase Volume Rising: Seasonality Increasing in Importance
Source: MBA Weekly Applications Survey 15
0
50
100
150
200
250
300
350
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51WeekoftheYear
PurchaseMortgageApplicationsIndex(byweekoftheyear,NSA)
2014 2015 2016 2017 2018
“Gig Job” Share Growing?
1995 2005 2017 Independent contractors
6.7 7.4 6.9
On-call workers 1.7 1.8 1.7 Temporary help agency
1.0 0.9 0.9
Contract workers 0.5 0.6 0.6 Total 9.9 10.7 10.1
Sources: BLS, Washington Post (Robert Samuelson) “Is the gig economy a myth?” 16
College Graduates Earn Nearly Twice the Wages of High School Graduates
Source: IPUMS CPS, MBA, Autor (2014)
40
50
60
70
80
90
100
1975 1979 1983 1987 1991 1995 1999 2003 2007 2011 2015
USCollege/HighSchoolPremium1975-2014Collegeversushighschoolrealwagegap(%)
17
Diverging Homeownership Trends
Source: IPUMS CPS, MBA
65%
53%
50%
55%
60%
65%
70%
75%
Homeownership Rate of 16 – 64 Year Old Heads By Education
College Degree, 16-64 year olds No College Degree, 16-64 year olds
18
The Rise of Alternative Student Debt Repayment Plans
Source: Office of Federal Student Aid and MBA
19
$0
$100
$200
$300
$400
$500
$600
$700
2013Q3 2013Q4 2014Q1 2014Q2 2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4
ChartoftheWeek-January27,2017FederalDirectStudentLoansinRepayment($B),ByRepaymentType
FixedPayment Other Graduatedpayment Income-Contingent Income-Based PayAsYouEarn REPAYE
20
21
Single Family Starts Still Gathering Steam; MF Steady
Source: Census, MBA 22
0
200
400
600
800
1000
1200
1400
1600
1800
2000
Thou
sand
s
SingleandMultiFamilyHousingStartsSAAR,thousands
HousingStarts:1Unit(SAAR,Thous.Units) HousingStarts:TotalMultifamily(SAAR,Thous.Units)
Labor Unfilled construction jobs rising
-
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
Job openings rate - Construction
12-month moving average
Source: BLS
Sluggish Home Sales As Inventory Remains Tight
-
2.0
4.0
6.0
8.0
10.0
12.0
14.0
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
Jan.2000
Jun.2000
Nov.2000
Apr.2
001
Sep.2001
Feb.2002
Jul.2002
Dec.20
02
May.2003
Oct.2003
Mar.2004
Aug.2004
Jan.2005
Jun.2005
Nov.2005
Apr.2
006
Sep.2006
Feb.2007
Jul.2007
Dec.20
07
May.2008
Oct.2008
Mar.2009
Aug.2009
Jan.2010
Jun.2010
Nov.2010
Apr.2
011
Sep.2011
Feb.2012
Jul.2012
Dec.20
12
May.2013
Oct.2013
Mar.2014
Aug.2014
Jan.2015
Jun.2015
Nov.2015
Apr.2
016
Sep.2016
Feb.2017
Jul.2017
Dec.20
17
May.2018
HomeSales(leftaxis)andInventory(rightaxis)Seasonallyadjustedannualrate
Existing New MthSupply(New) MthSupply(Existing)
Source: Census. NAR
Impact of International Buyers on US Existing Home Sales
Purchases of U.S. homes by international buyers was $121B in the fiscal year ending March 2018, down from $153B the previous year, a 21% decline, according to the NAR. The drop was driven by accelerating home prices, a strengthening dollar, and geopolitical concerns. The estimated number of units bought by international buyers is 266,800, or 5 percent of existing home sales (units). The share of dollar volume of home sales that this represents is around 8 percent.
House Price Growth Outpacing Income Growth; Price Gains to Slow
Source: FHFA, BLS 26
27
Cyclical Affordability Problems
Indexes = 100 in 1991. Source: FHFA and BEA
28
Cyclical Strain is Lower in Other Places
Indexes = 100 in 1991. Source: FHFA and BEA
29
Source: MBA Powered by Ellie Mae’s AllRegs® Market Clarity® 30
31 Source: MBA Powered by Ellie Mae’s AllRegs® Market Clarity®
FHA Credit Easing
Source: HUD 32
Shape of the Mortgage Industry
Source: 2011-2016 HMDA
33
36%
25%
4%
36%
30%
26%
5%
40%
27%
26%
5%
42%
24%
25%
5%
46%
21% 25
%
5%
48%
21% 23%
5%
51%
0%
10%
20%
30%
40%
50%
60%
LargeDepository CommunityBank CreditUnion(<$10bnAssets)
IndependentMortgageBank
ShareofHomePurchaseVolume(#)byCompany Type
2011 2012 2013 2014 2015 2016
52%
20%
7%
22%
45%
19%
7%
28%
47%
16%
7%
31%34
%
17%
8%
41%
27%
18%
8%
47%
26%
18%
7%
49%
0%
10%
20%
30%
40%
50%
60%
LargeDepository CommunityBank CreditUnion(<$10bnAssets)
IndependentMortgageBank
ShareofRefinancingVolume(#)byCompanyType
2011 2012 2013 2014 2015 2016
The Independent Mortgage Banker
Mortgage Banker Production Profitability Through the Cycle
Source: MBA Origination Estimates, MBA Performance Report 35
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
(60)
(40)
(20)
-
20
40
60
80
100
120
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
IMBNetProductionIncome(bps)vs.MBAEstimatedIndustryVolumeNPI(Basispoints) IndustryVolume$Billions Recession
36
IMB Net Production Income (basis points)
Source: MBA’s Quarterly Mortgage Bankers Performance Report, www.mba.org/performancereport
86.5
74.6
38.2
8.7
(8.3)
45.742.1
32.1
60.4
67.3
55.3
21.6
33.2
72.6 73.7
24.0
10.4
45.740.5
9.3
(7.8)
21.3
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
Q113
Q213
Q313
Q413
Q114
Q214
Q314
Q414
Q115
Q215
Q315
Q415
Q116
Q216
Q316
Q416
Q117
Q217
Q317
Q417
Q118
Q218
NetProductionIncome(bps)
Avg.ProductionVolume($M)
36.4
48.4
57.4
38.0
47.6
(7.8)
21.3
40.5
9.3
15.8
Avg.QuarterlyProductionProfit(bps):2008-Q22018 ProductionProfit(bps)-MostCurrentQuarter
Avg.Q217-Q218Q417Q317Q218Q118
AllQTRAvg.Q4Avg.Q3Avg.Q2Avg.Q1Avg.
37
IMB Net Production Income (basis points)
Source: MBA’s Quarterly Mortgage Bankers Performance Report, www.mba.org/performancereport
IMB Fully-Loaded Production Expenses ($ per loan)
Source: MBA’s Quarterly Mortgage Bankers Performance Report, www.mba.org/performancereport
38
5,779
5,818
6,368
6,959
8,025
6,932
6,769
7,000
7,195
6,984
7,080
7,747
7,845
7,120
6,969
7,562
8,887
7,774
8,060
8,475
8,957
7,877
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
Q113
Q213
Q313
Q413
Q114
Q214
Q314
Q414
Q115
Q215
Q315
Q415
Q116
Q216
Q316
Q416
Q117
Q217
Q317
Q417
Q118
Q218
Fully-LoadedProductionExpense($perloan) Avg.ProductionVolume($M)
Source: MBA’s Quarterly Mortgage Bankers Performance Report, www.mba.org/performancereport
Other Peer Groups
Peer Groups: Overall Net Production Income (bps)
Source: PGR: MBA and STRATMOR Peer Group Roundtables: www.mba.org/pgr 41
(40)
45
42
16
(50.0)
-
50.0
100.0
150.0
200.0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
LargeBanks LargeIndependents Mid-SizeIndependents Mid-SizeBanks
Peer Groups: Weighted Avg. Channel Mix (% based on $)
Source: PGR (2017 Data): MBA and STRATMOR Peer Group Roundtables: www.mba.org/pgr
42
37%29%
66%
85%77%
14%
11%
17%
4%
7%
3%
12%
6%2% 10%
47% 48%
10% 9% 6%
LargeBanks LargeIndependents Mid-SizeHybridBanks Mid-SizeCBCUs Mid-SizeIndependents
Correspondent
BrokerWholesale/Mini-Corr
ConsumerDirect
Retail
$2.4BAvg.TotalProductionVolume
$34.0B $21.2B $2.2B $1.4B
Total PGR Sample: Net Production Income by Channel (bps)
Source: PGR: MBA and STRATMOR Peer Group Roundtables: www.mba.org/pgr
59.210.0
43.1 45.113.0
(25.0)
-
25.0
50.0
75.0
100.0
125.0
2013 2014 2015 2016 2017
Retail
TotalSample
111.0 61.8 72.1 83.2 6.5
(25.0)
-
25.0
50.0
75.0
100.0
125.0
2013 2014 2015 2016 2017
ConsumerDirect
TotalSample
58.5
(8.6)
51.3 42.7 25.5
(25.0)
-
25.0
50.0
75.0
100.0
125.0
2013 2014 2015 2016 2017
BrokerWholesale/Mini-Corr
TotalSample
44.413.1
30.6 41.0 6.8
(25.0)
-
25.0
50.0
75.0
100.0
125.0
2013 2014 2015 2016 2017
Correspondent
TotalSample
Peer Groups: Retail Product Mix (% based on #)
Source: PGR: MBA and STRATMOR Peer Group Roundtables: www.mba.org/pgr (2017)
63%
24%
13% 15%
23%
34%
82%
42%
37%
2%7%
0%
80%
35%
28%
5% 3%7%
68%
26%
15% 15% 13%
35%
83%
43% 41%
2% 3%0%
Purchase First-TimeHomebuyer Government ARM Jumbo OriginatedforPortfolio
LargeBanks LargeIndependents Mid-SizeHybridBanks Mid-SizeCBCUs Mid-SizeIndependents
Peer Groups: Retail Channel Production Expenses
45 Source: PGR (2017 Data): MBA and STRATMOR Peer Group Roundtables: www.mba.org/pgr
5.4 4.4 5.2 5.7 4.4
4.7
3.94.3 4.5
3.9
2013 2014 2015 2016 2017
LoansClosedperLoanOfficer(permonth)
AllBanks AllIndependents
6.1 5.7 5.8 5.3 4.7
5.65.2 5.2 5.1
4.6
2013 2014 2015 2016 2017
LoansClosedperFulfillmentFTE(permonth)
AllBanks AllIndependents
Peer Groups: Retail Channel Productivity
Source: PGR: MBA and STRATMOR Peer Group Roundtables: www.mba.org/pgr
MBA Research Sign-Ups and Services
47
Contact Information and MBA Resources
48
Mike Fratantoni, Ph.D. Chief Economist & Senior Vice President | Research and Industry Technology 202-557-2935 mfratantoni@mba.org Marina B. Walsh Vice President, Industry Analysis | Research & Economics 202-557-2817 mwalsh@mba.org
MBA Research: www.mba.org/research
RIHA: www.housingamerica.org
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