A gloomier outlook was also shown in the Mortgage Bankers Association's latest monthly forecast. The June 20 forecast reflected downward revisions through 2027 from its previous, May 16 forecast, based on slower growth in home sales and economic growth coming to a crawl in the second half.

The MBA said it now expects $728 billion in originations for purchases in the second half, up 10% from a year earlier. Next year it expects purchases to rise 7% to $1.46 trillion. The number of loans is expected to rise 7% in the second half and 6% in 2026.

J.P. Morgan analysts said one sign of weak demand is higher vacancy rates, especially in the South.

“Regional disparities show a tale of two housing markets as prospective buyers in the Northeast and Midwest markets exceed the number of available homes, while parts of the Sunbelt are seeing a flood of homes for sale,” they wrote. “Since the pandemic, many Americans have flocked to Sunbelt regions, which include states like Florida, Alabama, Georgia and Texas, but the wave of supply that has come to market has still not yet been absorbed.”

High vacancies included the rental market in the Sunbelt. The report said vacancy rates in Austin, Texas have climbed to 15%, while “cities like Boston and Chicago, which investors had largely overlooked during the pandemic, are showing greater resilience.”

A similar regional disparity was reflected in an analysis by CU Times of credit union mortgage originations over the past two years from the Home Mortgage Disclosure Act.

The number of first mortgages originated to owner-occupants for single-family houses rose 3% nationally from 2022 to 2023 for a sample of 34 of the largest credit union mortgage producers.

But the gains were far stronger in the Midwest while the South experienced declines in both the count and value of originations. The data showed:

• In the Midwest the number of loans originated rose 11.1% and the amount rose 18.4%. The average loan last year was $276,046, up 6.5%.
• In the South the number of loans originated fell 7.2% and the amount fell 4.8%. The average loan last year was $303,030, up 2.7%.
• In the Northeast the number of loans originated rose 5% and the amount rose 11.6%. The average loan last year was $379,376, up 6.2%.
• In the West the number of loans originated rose 4.4% and the amount rose 5%. The average loan last year was $452,613, up 0.6%.

The J.P. Morgan analysis estimated that 80% of borrowers hold mortgages with rates at least 100 basis points below current mortgage rates.

That group is now holding mortgages with an average fixed rate of 4% in an environment where rates were at 6.8% in June, “meaning they have a significant disincentive to sell, creating a dearth in supply.”

Its analysts have said demand would likely remain at exceptionally low levels and is unlikely to improve until mortgage rates fall toward 5%.

They had forecast mortgage rates to fall to 6.5% by the end of this year, “but fiscal and inflation concerns have moved U.S. 10-year yields (and in turn, mortgage rates) higher since Liberation Day,” April 2, when President Trump announced higher tariffs for countries across the globe.

“With the Fed now expected to remain on pause until December, mortgage rates are unlikely to decline materially,” they wrote.

Contact Jim DuPlessis at [email protected].