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Housing is so unaffordable banks lost money for each mortgage they financed last year, according to a new report.
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Independent mortgage banks and mortgage subsidiaries of chartered banks lost an average $301 per loan, the first negative profit recorded by the Mortgage Bankers Assocation in data going back to 2008.
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They attribute that largely to the increased cost of financing a loan and decreased housing demand.
The housing environment is so unaffordable that certain banks lost money for each mortgage they financed last year — the first time that’s ever happened, according to the Mortgage Bankers Association.
In 2022, independent mortgage banks and mortgage subsidiaries of chartered banks banks lost an average $301 for every mortgage they financed, the MBA said in a recent report. That represents a 113% decrease from last year’s average income of $2,339 per mortgage, and is the first time that banks posted negative profits for financing home loans since the MBA began recording profits in 2008.
That’s largely due to the decrease in housing activity, MBA’s vice president of industry analysis Marina Walsh said in a statement. Prospective buyers are holding back from the market as mortgage rates hover near a 20-year high and limited housing supply keeps home prices elevated.
Banks and other mortgage companies each financed an average $2.6 billion in loans in 2022, roughly half of the $5 billion figure for 2021.
Meanwhile, the cost of financing a loan has gone up, as the decline in workers isn’t fast enough to make up for the decline in business. Banks and mortgage companies spent an average $10,624 to finance each home loan in 2022, representing a 23% cost increase from 2021.
“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,” Walsh said. “The stellar profits of the previous two years dissipated because of the confluence of declining volume, lower revenues, and higher costs per loan.”
Some experts warned last year that the US housing market could see a huge correction as the shrinking demand leads to a drop in home prices. Home prices could fall by 9% this year, one MBA board member previously said. Other experts have predicted a more mild correction, with one National Association of Realtors economist predicting that prices had already bottomed out, and the housing market could see a rebound.
Read the original article on Business Insider
Source: finance.yahoo.com