During the first quarter of 2017, mortgage lender expectations for the economy and home prices were the highest ever recorded by Fannie Mae’s Mortgage Lender Sentiment Survey (MLSS).
The percentage of lenders who believe the economy is on the right track reached its highest point since the inception of the MLSS in 2014. Demand growth expectations for purchase mortgages, however, declined substantially, and lenders raised concerns about several other changing market factors. The complete analysis can be read here.
“This quarter, lenders’ optimism toward the overall economy and home price appreciation hit survey highs, mirroring the consumer confidence seen in our February Home Price Sentiment Index,” Fannie Mae Senior Vice President and Chief Economist Doug Duncan said in a press release. “However, lenders’ profit margin outlook remains significantly less positive than this time last year and two years ago.”
The MLSS found:
- Lenders reporting demand growth expectations for the next three months rose from survey lows last quarter.
- Purchase mortgage demand growth over the prior three months declined for all loan types, when compared with the first quarters of 2016 and 2015.
- The net share of lenders expecting increased demand over the next three months declined to the lowest level for any first quarter since the survey’s inception in 2014.
- For refinance mortgages, lenders reporting rising demand over the prior three months decreased.
“Lenders cite competition from other lenders and a market shift from refinance to purchase – both of which reached survey highs – as the top reasons for the weak profit margin outlook,” Duncan said.
“With mortgage rates expected to rise, we expect refinance activity will fall and purchase affordability will tighten, increasing competitive pressure in a shrinking mortgage market. Lenders may choose to adjust their production capabilities and staff resources given their profitability outlook,” he said.