Speaking at the annual conference of the Mortgage Bankers Association (MBA) in Austin recently, MBA’s Chief Economist and Vice President of Research and Industry Technology, Mike Fratantoni said, “We could absolutely get a recession in the first half of next year is what makes sense for when it could happen.” Translation: Fratantoni forecasted a recession in the US as early as the first half of next year.

Fratantoni spoke of the inter-relatedness of global economies as being a factor in his prediction about a recession. He speculated that a clean Brexit resolution could put “upward pressure on rates.” He also pointed to the European Union’s damage to its financial system “by letting rates go negative.”

He said, “If we are going to get higher rates next year, it’s going to be from better news that we’ve been anticipating from abroad.”

The MBA had formerly predicted a 1% economic growth rate in 2020 but has since revised that prediction downward to 0.9%. (Already, the economic growth rate had slipped to 1.9% in October 2019 thus overturning previous growth rate predictions of 3.2% by the Trump Administration.)

Fratantoni’s predictions for the overall economy:

  • The Federal Reserve initiating one more rate cut in 2019 and then holding steady into 2020.
  • The 10-year Treasury increasing slowly to 1.9% in 2020 thus causing the 30-year fixed rate to go up to approximately 4%.
  • Refinance activity plummeting by -24.5% in the second half of 2020.
  • Purchase originations increasing by +1.6% to $1.29T in 2020.
  • Mortgage originations increasing to $2.06T, the highest since $2.31T in 2007.
  • Home price growth both continuing AND slowing into 2020 as increasing supply comes onto the market.

Fratantoni said, “Moderating price growth is healthy, as it allows household incomes to catch up with home values. This improvement in affordability will lead to more home sales – especially given the rise in household formation and growing demand from first-time homebuyers.”

Lastly, Fratantoni said, “The health of the labor market plays a significant role in the outlook for housing. Although job growth is expected to slow along with the economy, overall market conditions look decent next year. Low mortgage rates and Millennial buyer demand will be the primary reasons for a slight increase in purchase activity in 2020.”

Thanks to HousingWire’s Kelly Ramirez for source data.

Also read: Ripple Effects of Mass Shootings on Real Estate, Housing Market Flashing Recession Signal, Markets That May See Downturn in Possible Recession