Rates stabilize and supply grows
The Mortgage Bankers Association (MBA) projected that single-family mortgage originations will climb to $2.2 trillion in 2026, up from $2.0 trillion expected this year, as the industry braces for a year shaped by shifting rates, evolving affordability, and regional disparities in home prices.
Speaking at the MBA’s 2025 Annual Convention and Expo, chief economist Mike Fratantoni outlined the group’s latest forecast, noting that “the FOMC cut rates in September, and we expect additional cuts at the end of October and in December. While inflation is still above the Fed’s target, the job market has weakened, and we expect that the FOMC will continue to focus more on its full employment goal.”
Fratantoni said the unemployment rate could rise from 4.3% to 4.7% by mid-2026, even as widespread layoffs remain unlikely.
Purchase originations are forecast to rise 7.7% to $1.46 trillion, while refinance activity is expected to jump 9.2% to $737 billion. By loan count, total mortgage originations should reach 5.8 million in 2026, up from 5.4 million this year.
Fratantoni pointed to a mix of lower mortgage rates and flat home prices as drivers of improved affordability, but cautioned that “the increase in inventories will put downward pressure on home prices across the country. Home-price declines nationally are expected to decline for several quarters over the next few years.”
He also flagged that “the risk of growing budget deficits and elevated inflation expectations will keep longer term rates from falling further, even as the Fed cuts short-term rates.”
Regional disparities shape market outcomes
Joel Kan, MBA’s deputy chief economist, highlighted the location-specific nature of housing trends.
“Growing housing inventory in markets such as Florida, Colorado, and Arizona have led to annual home-price declines, while tight inventory and challenges to homebuilding in the Northeastern and Midwestern states such as New York, Connecticut, Illinois, and New Jersey drive price appreciation well above the national average,” Kan said.
Kan added that while median principal and interest payments are gradually declining, they remain “significantly higher than they were five years ago, given cumulative home-price appreciation and the current level of mortgage rates.”
He noted a shift toward ARM and FHA loans as borrowers seek to manage affordability challenges, and cited rising taxes and insurance costs as ongoing hurdles.
Profitability returns, but challenges persist
On the lender side, Marina Walsh, MBA’s vice president of industry analysis, reported that “production profitability in the second quarter of 2025 was the highest since 2021, a welcome development after ten quarters of net production losses.”
Walsh said lenders are exploring technology and process improvements to cut costs, with some considering mergers or acquisitions for scale. She also warned that “delinquency rates – particularly for government loans – are likely to increase as unemployment rises, putting pressure on servicing costs.”
Despite these headwinds, Walsh emphasized the resilience of US homeowners, who have amassed roughly $36 trillion in home equity.
“This build-up in equity gives many borrowers options to resolve financial hardship — including loan workouts, cash-out refinances and home equity loans, or selling their homes to avoid foreclosure,” she said.
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