Bank of America just released their outlook for mortgage originations in 2027, and I have to be honest with you, it's pretty sobering. According to HousingWire, the bank is forecasting total mortgage volume to hit $1.719 trillion next year, with only about $344 billion of that coming from refinances. What catches my attention is that this puts Bank of America's projection below the $2 trillion mark, joining several other major forecasters who are similarly cautious about next year's market.
The bank's analysts are expecting some real headwinds in the housing market. They're penciling in higher mortgage rates as we head into 2027, weaker home sales activity, and ongoing affordability challenges that have been plaguing us for years now. Their forecast assumes we'll see existing home sales decline by about 2.5 percent year-over-year, while new home sales might tick up just slightly. These conditions are what's driving their projection down about 15 percent from what they're expecting for 2026.
What really stood out to me is how Bank of America is framing 2027 as similar to 2023 in many ways, but potentially even tougher. Back in 2023, a lot of buyers still held out hope that higher rates were temporary and played the "buy now, refinance later" game. By 2027, we'll have lived with elevated rates for nearly five years, and that psychological cushion has eroded. Add to that the fading work-from-home boom that supercharged housing demand during the pandemic, and you can see why the analysts think we're facing some real challenges ahead.
On the mortgage-backed securities side, Bank of America expects issuance to drop to just over $1.12 trillion in 2027, down from about $1.33 trillion this year. They're seeing more cash deals happening in this high-rate environment, and borrowers are holding onto those lower-rate loans from years ago, which is what everyone calls the lock-in effect. That's keeping inventory constrained and making it tougher for transactions to happen.
What I am seeing locally here in the Bay Area and across the East Bay is that we're already living in this kind of market right now. Buyers are facing real pain when it comes to affordability, and sellers are having to make tough decisions about pricing. If Bank of America's projection pans out, we need to prepare ourselves for a market that stays challenging through 2027, with fewer transactions, less refinance activity, and continued pressure on home values and buyer confidence.
