WGA Releases Q4 2023 Housing Finance Outlook

Home Mortgage Rates Head for 8%

WGA LLC

Whalen Global Advisors (“WGA”) has published its latest outlook on the U.S. Housing Finance Sector. 

“Home prices around the nation are starting to see signs of fatigue from high interest rates and a resulting dearth of rate sensitive buyers,” notes WGA Chairman Christopher Whalen. “The strong demand for cash out refinance transactions continues, however, as homeowners monetize record equity vs. 20% plus credit card rates.”

The new report from WGA notes that residential mortgage interest rates will slowly rise towards 8% and new loan volumes are likely to be at or below $1.5 trillion in new originations for the next two years, with more than 90% purchase mortgages in total industry volumes.

“Lending capacity in the mortgage industry needs to decline by about half in order for the surviving lenders to become profitable,” notes Whalen. “Meanwhile, the new Basel capital proposal for banks will cut the profitability of mortgage lending in half,” Whalen observes, adding that the market share of nonbank lenders and servicers will grow rapidly if the Basel proposal is adopted. 

“In a recession, prices above the $440k median home price are likely to see compression before lower priced assets, but the process of normalization of home prices may take years,” the report notes. “Homes priced below the median level are likely to resist downward pressure due to supply constraints.”   

Copies of the IRA Housing Finance are available to subscribers to the Premium Service of The Institutional Risk Analyst. Standalone copies of the report are also available for purchase in our online store. Media wishing to receive a courtesy copy of the report please email: info@theinstitutionalriskanalyst.com

About Whalen Global Advisors LLC

Whalen Global Advisors LLC (WGA) is a New York-based consulting, risk analytics and publishing company that focuses on financial institutions and global markets. WGA publishes The Institutional Risk Analyst (ISSN 2692-1812), including commentary on the capital markets, industry reports and company profiles. For additional information, please contact us at: info@rcwhalen.com

Source: Whalen Global Advisors LLC