The Mortgage Bankers Association (MBA) stated that for the first time ever, in 2022, banks were losing money on every mortgage they’d financed.
The report from MBA states that “banks lost an average of $301 on each loan they originated in 2022, down from an average profit of $2,339 per loan in 2021.” This is the first time in MBA’s recorded history that they reported this type of loss from independent mortgage banks and mortgage subsidiaries of chartered banks.
The cost of financing a loan has increased to an average of $10,624 as the decline in business is too fast for the decrease in workers. Marina Walsh, the MBA’s VP of Industry Analysis stated that;
“The rapid rise in mortgage rates over a relatively short period of time, combined with extremely low housing inventory and affordability challenges, meant that both purchase and refinance volume plummeted,” adding that “The stellar profits of the previous two years dissipated because of the confluence of declining volume, lower revenues, and higher costs per loan.”
What Caused The Unaffordable Housing Prices
Mortgage rates are near 20-year highs, and house prices are expected to creep upwards as demand is exceeded by the housing supply. Nadia Evangelou, economist and director of research at the National Association of Realtors told Business Insider that a housing crash isn’t expected;
“Back in 2008, we had an oversupply of homes by like 4 million, but now we have less than 1 million, and this is the main factor that keeps home prices from falling.”
Evangelou predicts that housing may drop slightly this year, but only short term, as prices are expected to jump once again in 2024.
On the other hand, Jeff Taylor, an MBA board member, stated that housing prices could fall by over 9% in 2023. Following this would be trading volumes hitting 40-year-lows as individuals aren’t moving around or selling either.
