Uncertainty rises in Texas’ residential mortgage industry with upside on the regulatory front

COLLEGE STATION – Lower mortgage interest rates helped stabilize residential mortgage activity in June, according to the latest Texas Residential Mortgage Survey (TRMS). The mortgage interest rate index fell for the first time this year, and the expectations index indicated room for improvement over the next six months.

“TRMS respondents saw lower rates for the first time this year but also noted an increase in uncertainty,” said Texas Mortgage Bankers Association (TMBA) Vice President Erin Dee. “The last week of June provided good reason for that uncertainty, with economic data driving rates back up to higher levels. There is still a great deal of concern over whether the Fed will cut rates in 2024, and the data released at the end of June did not help ease those concerns.”

The TRMS uncertainty index dipped into negative territory (indicating worse levels of uncertainty) after hovering above zero for most of the past six months.

“On the upside, the Supreme Court overturned the Chevron deference, which could very well clip the Consumer Financial Protection Bureau’s (CFPB) wings when challenged in the courts,” Dee said. “It is still far too early to know exactly how the Chevron ruling will impact CFPB enforcement and rulemaking, but it will be very interesting to see the ramifications on the industry in the years to come.”

The Chevron ruling occurred on June 28^th, and its impact is not reflected in the June edition of the TRMS, where respondents mentioned increased regulatory burden.

Monthly business activity benefited from stable home-purchase origination volume and an uptick in the refinance market. Refinance origination volume has shown signs of bottoming out after substantial declines in 2022 and 2023. The average values of home-purchase and refinance originations are projected to increase during the second half of 2024, but moderating home-price appreciation has dampened expectations.

“Nominal home values across Texas have been relatively stable over the past two years as tighter monetary policy reigned in explosive growth that occurred during the COVID-19 pandemic,” said Wes Miller, Ph.D., senior research associate at the Texas Real Estate Research Center at Texas A&M University (TRERC). “The TRERC Texas Home Price Index is up just 1 percent since June 2022.”

Home prices outperformed initial negative projections for 2024, and TRERC now forecasts the sideways pattern to continue through most of year end.

“The robust labor market and economy is supporting housing demand,” said Miller, “and the ongoing supply crunch is also providing a floor for home prices.”

Despite heightened uncertainty, the TRMS company-outlook index has increased every month this year, and there is a clear sense of optimism as inflation normalizes and the industry begins to emerge from the Federal Reserve’s recent phase of rate hikes.

The TRMS is a collaborative effort between the TMBA and TRERC to provide analysis of conditions and changes in the residential mortgage industry. Designed as a monthly sentiment survey to gauge current conditions and expectations in and around the Texas residential mortgage industry, all TMBA members are invited to participate.