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The Institutional Risk Analyst

© 2003-2024 | Whalen Global Advisors LLC  All Rights Reserved in All Media |  ISSN 2692-1812 

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Housing Finance Outlook Q4 2023

November 15, 2023 | Premium Service | Whalen Global Advisors (“WGA”) has published its latest outlook on the US Housing Finance Sector. Suffice to say that things in the world of 1-4 family residential mortgages are as tough today as they were fantastic in mid-2020. Could not be more different. Mortage lenders just reported another negative quarter in terms of income.

Copies of the IRA Housing Finance Outlook are available to subscribers to the Premium Service of The Institutional Risk Analyst. Standalone copies of the report are also available for purchase in our online store. Media wishing to receive a courtesy copy of the report please email:

“Home prices around the nation are starting to see signs of fatigue from high interest rates and a resulting dearth of rate sensitive buyers,” notes WGA Chairman Christopher Whalen. “The strong demand for cash out refinance transactions continues, however, as home owners monetize record equity vs 20% plus credit card rates.” The report notes that rental rates are starting to soften in some urban markets.

The new report from WGA notes that that residential mortgage interest rates will likely rise towards 8% and new origination volumes are likely to be at or below $1.5 trillion, with more than 90% purchase mortgages in that flow, for the next two years. Baring some considerable emergency, the Fed seems on track to keep interest rates at current levels indefintely.

“Lending capacity in the mortgage industry needs to decline by about half in order for the surviving lenders to become profitable,” notes Whalen, who adds that one operator recently quipped that "it has definitely been better to be a servicer in this environment."

“Meanwhile, the new Basel capital proposal for banks will cut the profitability of mortgage lending in half,” Whalen relates. "The whole proposal ought to be reworked to focus on market risk and balance sheet management." He adds that the market share of nonbank lenders and servicers will grow rapidly if the Basel proposal is adopted. Meanwhile, home price compression is visible in many high end markets.

“In a recession, prices above the $440k median home value are likely to see compression before lower priced assets, but the process of normalization of home prices may take years,” the report notes. “Homes priced below the median level are likely to resist downward pressure due to supply constraints.”  

In the IRA Housing Finance Outlook, we look at how members of our mortgage equity surveillance group have performed over the past five years, going back to before COVID and “go big” ℅ the FOMC and Chairman Jerome Powell.  Who are the best performers in the mortgage equity group in terms of total return over the past five years?

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