TPOs continue to account for around a quarter of mortgage originations
Retail is continuing to dominate the mortgage origination market – but the share of third-party purchase originations (TPO) has remained stubbornly steady in recent years, according to a new study.
The National Association of Mortgage Brokers’ (NAMB’s) 2024 Homebuyer Report, released at its recent National conference in Las Vegas, showed that TPO purchase originations continued to hover around the 24% mark in market share between 2018 and 2023, underlining the “key role” played by independent brokers and agents in the mortgage space.
Housing insights for the report were provided by Freddie Mac, whose economist Moffii Ige highlighted key findings in a presentation to the conference on October 20.
While TPO purchase volume has dipped in recent years amid a wider mortgage market cooldown, a similar drop on the retail side means neither has seen a sizable fall in market share. “What we see is between 2018 and [around] 2021, the volume of TPO purchase originations had been relatively stable,” Ige said, “but then in 2022, 2023, mortgage rates were high, so… originations dipped a little bit. But we see a similar trend for retail originations as well.
“In terms of looking at the share of purchase TPO originations in total, we’re seeing that represents about a quarter of originations.”
Refinance originations remain muted on TPO side
TPO refinance originations saw an uptick in volume between 2018 and 2020 – but climbing mortgage rates since 2022 meant that activity “dropped significantly”, Ige said, even though the TPO space’s refinance market share stayed “relatively stable” at about 14% between 2018 and 2023.
Regional insights showed that large metropolitan areas including Dallas, New York, and Houston topped the list of areas with the highest levels of third-party purchase originations.
Tailored mortgage solutions and a wider range of loan products were essential in those areas, NAMB’s report said, because of acute challenges including inventory shortages and high home prices.
Major metropolitan areas also accounted for the highest volume of third-party refinance originations – namely San Francisco, Los Angeles, and New York.
What’s the outlook for 2025?
Falling mortgage rates over the summer sparked hopes that the market could be set to turn for the better in 2025, although those rates have recently ticked higher amid stronger-than-expected economic data and the labor market’s robust performance.
The average rate on a 30-year mortgage in the U.S. rose for the third consecutive week, reaching 6.44%, its highest in eight weeks, according to Freddie Mac.https://t.co/BE9ZQeZnlP#MortgageRates #HousingMarket #Economy
— Mortgage Professional America Magazine (@MPAMagazineUS) October 19, 2024
September saw nonfarm payrolls across the country rise by 254,000, a development that potentially lowered the prospect of an oversized cut by the Federal Reserve at its next announcement.
NAMB’s report spotlighted a number of key trends it says will continue to play a crucial role in influencing the outlook for the year ahead.
Unsurprisingly, low housing supply features near the top of that list, a problem compounded by the fact that plenty of homeowners are opting to stay in their properties for longer because their current mortgage rates are lower than they might expect if they moved to a new home.
New housing starts are also well below the required level, NAMB’s report said, “contributing to a broader housing supply shortage, exacerbating affordability challenges and limiting options for prospective buyers.”
Some progress has been made, meanwhile, in closing the gap between minorities and non-Hispanic white Americans – although Ige emphasized “work to do” in further reducing that disparity.
High home prices and mortgage rates, as well as a lack of supply, have posed challenges in getting minority homebuyers into homes, even if the overall picture has improved somewhat since 2019.
The White-Black gap fell from 32.1% to 28.3% between 2019’s first quarter and Q1 2024, with the White-Latino gap narrowing slightly (25.8% to 24.1%) and the White-AANHPI (Asian American and Native Hawaiian/Pacific Islander) disparity dropping from 16.3% to 11.8% during the same period.
While affordability and social equity will continue to present significant hurdles in the 2025 mortgage and housing markets, NAMB’s report also highlighted “opportunities for innovation and growth” in the housing market. “By addressing these challenges and leveraging opportunities,” the association said, “the goal of increasing homeownership rates and creating stable, inclusive communities can be achieved.”
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