2018 predictions: Rates will rise, but loans will drop as home sales decline

By Jeff Lazerson


Rate news summary

From Freddie Mac’s weekly survey: The 30-year fixed-rate averaged 3.94 percent, 1 basis point higher than last week’s 3.93 percent. The 15-year fixed averaged 3.38 percent, 2 basis points higher than last week’s 3.36 percent.

The Mortgage Bankers Association reported a 4.9 percent decrease in loan application volume from the previous week.

Bottom line: Assuming a borrower gets the average 30-year fixed rate on a conforming $453,100 loan, last year’s rate of 4.30 percent and payment of $2,242 was $94 more than this week’s payment of $2,148.

What I see: Locally, well-qualified borrowers can get the following fixed-rate mortgages at zero-point cost: A 15-year at 3.25 percent, a 30-year at 3.875 percent, a 15-year agency high-balance ($453,101 to $679,650) at 3.625 percent, and a 30-year agency high-balance at 4.125 percent.

What I think: Here are my 2018 predictions. And, I’m hoping you’ll be so excited you won’t read further down about my 2017 lump-of-coal results.

  1. The 30-year fixed rate will increase, averaging 4.5 percent in 2018 because of a tax-cut heated economy.
  2. U.S. residential loan volume will decrease more than 12 percent to $1.5 trillion.
  3. First-time buyers will decrease 10 percent because of the doubling of the standard tax deduction, reducing the incentive to buy a home.
  4. Cash-out refinance volume will explode, increasing 15 percent. Homeowners will roll their no longer deductible home equity line of credit into a single first mortgage.
  5. U.S. reverse mortgage volume will increase 15 percent because fewer seniors have rainy day assets beyond home equity.
  6. U.S. housing starts will increase 15 percent.
  7. The Federal Reserve will raise short-term rates just once in 2018.
  8. The Consumer Financial Protection Bureau will loosen up on its ability to repay rule, allowing more borrowers to qualify for mortgages.
  9. Orange County home sales will drop 5 percent to avoid the $10,000 state and local tax cap?
  10. Orange County’s median home price will increase 5 percent. The economy is going to pot. That will increase price pressures on fewer homes going up for sale.

2017 Predictions and Results

  1. The 30-year fixed would average 4.375 percent. Wrong. It averaged 3.99 percent.
  2. Total loan volume would be $1.2 trillion. Wrong. It totals of more than $1.7 trillion.
  3. President Trump would create tax credits and lower tax rates. Correct, though it’s more on the tax rate side.
  4. Orange County home sales would decrease 12 percent. Wrong. Sales are up 2 percent this year so far, CoreLogic reports.
  5. Orange County’s median home price would be flat. Wrong (again). The median is up 6.6 percent this year so far.
  6. Reverse mortgage volume would increase 10 to 15 percent. Correct! Reverse mortgage volume increased 13.1 percent.
  7. California would protect consumers by banning mortgage companies from participating in payola schemes with builders, realty firms and agents. Wrong.
  8. Fannie and Freddie will not privatize. Yes!
  9. Mortgage interest deduction is not going away or getting reduced. Wrong. New mortgage interest deductions will be capped at $750,000.
  10. Fed Chair Janet Yellen will raise rates twice. She raised them three times. Wrong. Wrong. Wrong.

I made three out of 10 2017 predictions. Shameful.

If you have questions or comments, please contact Jeff Lazerson by clicking here.


Sample Image

Jeff Lazerson - Mortgage Columnist since 2011