According to HousingWire, the Mortgage Bankers Association is forecasting that total single-family mortgage origination volume will decline in 2027, dropping to just under two trillion dollars. The MBA's chief economist spoke at their annual convention and explained that while rates may ease somewhat from their recent peaks, they're not expected to fall significantly. The baseline projection shows that thirty-year fixed mortgage rates will remain above seven percent throughout 2027, which is putting real pressure on the lending market.
The persistence of higher rates comes down to a few key factors working together. First, inflation has proven stickier than expected, with recent energy price shocks keeping pressure on the overall economy. Second, investors are pricing in a wider margin between mortgage rates and Treasury yields because of the volatility we've recently experienced. The MBA economists believe the Federal Reserve will need to raise rates a couple more times before inflation comes under control, with hikes potentially coming in December and early next year.
When we look at where the volume is headed, purchase originations are expected to stay relatively flat, but refinancing is taking a real hit. With so many homeowners locked into mortgages below four or five percent, there's simply no financial reason for them to refinance at seven percent or higher. This lock-in effect is keeping people in their homes and discouraging both sales and refinance activity.
On the positive side, home price appreciation is moderating, with national growth slowing to around two percent annually. However, this cooling in prices isn't translating to more activity because rates remain the bigger constraint. The MBA also expects new construction to decline over the forecast period, which suggests housing inventory will remain tight despite slower price growth. The mortgage industry itself is consolidating, with thousands of companies still in the game but facing tight profit margins except for the largest players.
What I'm seeing locally here in the Bay Area and East Bay reflects these national trends pretty closely. Buyers are still very selective and rate-sensitive, and sellers with lower-rate mortgages are holding onto their homes rather than moving. If rates do stay above seven percent through 2027 like the MBA is forecasting, we should expect continued softness in sales volume and transaction activity, though it's worth keeping an eye on whether prices stabilize sooner than the forecasts suggest.
