The trade association expects inflation, which is currently at a record high of 9.1%, to end 2022 at around 6% before falling to a 2%-2.5% range in 2023 and 2024. The Federal Reserve will also likely continue tightening its funds rate at a range of 3.25% to 3.5% at the end of the year and a range of 3.75% to 4% in 2023.
“While inflation remains stubbornly high, the Fed’s rate hikes and weakening demand will push the inflation rate down over the next year,” MBA said. “Lower demand for commodities will cool headline inflation and ease supply-chain backlogs.”
While the Fed does not set mortgage rates, the spike in federal funds rate has indirectly impacted the housing market. Home sales declined for the fifth month in a row. Housing construction activity grew weaker along with consumer demand.
MBA downgraded its forecast for existing-home sales (down 8%) in 2022. It also anticipates purchase origination volume to remain virtually unchanged at $1.66 trillion before edging up to $1.7 trillion in 2023.
As for refinance activity, MBA said refi originations will nosedive 70% to $706 billion as mortgage rates remain high for the rest of the year. The 30-year is expected to hover around 5% to 5.2%.