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44 | M R EP O RT O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST ORIGINATION Plurality of Home Lenders Expect Dip in Profits Mortgagees' pessimism, while waning, reportedly is tied to increased competition. M ortgage lenders expressed mixed feelings in the fourth quarter, with a quarterly decrease in the share of respondents to Fannie Mae's Mortgage Lender Senti- ment Survey expecting lower profit margins in the next three months. Forty-six percent of respondents expect that earning dip, which is an improvement over last quarter's 69%, while 38% believe profits will remain the same and 15% believe profits will increase. Pessimism, according to the respondents, is primarily related to increased competition and changing market conditions, while those with a more bullish outlook cited GSE pricing and policies and strong consumer demand. Lenders appear to have adopted a more neutral posture—more re- ported reduced consumer demand over the previous three months for purchase mortgages but improved demand for refinance mortgages, according to Fannie Mae VP and Deputy Chief Economist Mark Palim. Still, the reported change in mortgage demand over the previous three months, as well as expectations for the change in de- mand over the next three months, remained positive on net for pur- chase mortgages but still slightly negative for refinance mortgages. "More lenders than not re- ported expectations that purchase mortgage demand will continue to grow, though the total share expecting such growth fell sub- stantially compared to the previous quarter," Palim said. "Meanwhile, a plurality of mortgage lenders expects refinance activity to con- tinue to wane from the highs of the past year and a half—even so, their outlook on likely refi volumes was improved compared to the prior quarter. Of the lenders who expect purchase mortgage demand to decrease in the coming months, high home prices and a limited supply of homes for sale were the primary reasons given—these were also among the top reasons provided by the 63% of consum- ers who believe it's a 'bad time to buy a home', according to our latest Mortgage Lender Sentiment Survey results." Palim went on to summarize that, on net, mortgage lenders' profitability outlook improved slightly from last quarter. "Although more lenders than not continue to expect profit margins to decline in the months ahead," he added. "The primary-secondary spread, an indicator of potential profit- ability, remains wider than the previous decade's average." Palim says, adding that this is a posi- tive sign for lenders. However, he explained, in August it was at its narrowest since February and 53 basis points below the peak seen in August 2020. "While lenders continue to overwhelmingly cite increased competition as their primary con- cern regarding future profitability, the share citing personnel costs for their diminished profit margin outlook increased significantly," he said, "suggesting that mortgage lenders' ability to efficiently man- age their workforces will be critical to their bottom lines as competi- tive pressures remain intense." Homebuyers Predict Favorable Market Conditions Through Year End Despite the dizzying headwinds of the pandemic, consumers shopping for homes still generally believe it's going to be a good time to buy over the next three months. A s the COVID-19 pan- demic shows signs of slowing and people re- turn to work, optimism is rising among consumers, even as new home prices soar and inven- tory dwindles. According to a new survey by real estate search company Movoto, consumers showed confidence that the market would show favorable conditions to buy- ers in the next three months. On a scale from -100–100 buyers scored the market at +22.9, with 0 being a neutral sentiment on buying condi- tions over the next three months. The survey, conducted by OJO Labs for Movoto, asked respon- dents collected from their website the simple question, "How much do you agree or disagree with this statement: I am confident that the next three months will be a good time to buy a home?" "Of the group surveyed, 32.0% of respondents agreed that the next three months would be a good time to buy a home, while 20.6% strongly agreed that it would be a good time to buy a home," said Patrick Kearns, the Director of Storytelling at OJO Labs. "Overall, over 52% of respondents expressed a positive sentiment." "Only 17.8% of respondents neither agreed nor disagreed with the statement that the next three months would be a good time to buy a home, while the other 29.6% expressed a negative sentiment about buying conditions over the next three months," Kearns contin- ued. "Of the total respondents, 21.3% strongly disagreed that the next three months would be a good time to buy a home, while 8.25% just disagreed with the statement." Regionally, buyers in California, Florida, and Texas—some of the hottest markets in the country— were generally positive about the housing market with California scoring the prospective market at +4.7. Respondents in Florida scored the market at +36.1 while Texas scored a +10.3.