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Refinance application activity was virtually unchanged, posting a 0.1% gain from the previous week. Consequentially, the refi share of mortgage activity grew five basis points to 28.8%. Meanwhile, purchase applications fell 2% to the slowest rate since 2015 – 42% behind last year’s pace.

“Despite higher rates and lower overall application activity, there was a slight increase in FHA purchase applications, as FHA rates remained lower than conventional loan rates,” Kan said. “MBA’s forecast expects both economic and housing market weakness in 2023 to drive a 3% decline in purchase originations, while refinance volume is anticipated to decline by 24%.”

MBA anticipates total mortgage origination volume to decrease to $2.05 trillion in 2023, down from its $2.26 trillion forecast in 2022.

MBA’s forecast calls for a recession in the first half of next year, driven by tighter financial conditions, reduced business investment, and slower global growth,” Kan said. “As a result, the unemployment rate will increase from its current rate of 3.5% to 5.5% by the end of the year. Inflation will gradually decline towards the Fed’s 2% target by the middle of 2024.”