BTIG: Higher rates to hit Q2 originations as nonbanks lean on MSR gains

Higher mortgage rates are expected to impact the second-quarter originations and third-quarter guidance for nonbank lenders, which could have a ripple effect on the construction industry. As mortgage rates rise, it becomes more expensive for homebuyers to secure financing, potentially leading to a decrease in demand for new homes. This decrease in demand could result in a slowdown in construction activity, as builders may be less likely to break ground on new projects if they anticipate a decrease in sales.

The fact that nonbank lenders are relying on mortgage servicing rights (MSR) gains to offset the decline in originations is also noteworthy. MSR gains are a result of slower prepayments, which means that homeowners are holding onto their mortgages for longer periods of time. While this may provide a short-term boost to nonbank lenders, it does not address the underlying issue of decreased demand for new mortgages. As the construction industry is closely tied to the mortgage market, any changes in mortgage demand can have a significant impact on construction activity.

As the second-quarter earnings season approaches, it will be important to watch how nonbank lenders perform and how they adjust their guidance for the remainder of the year. Additionally, construction industry professionals should keep an eye on mortgage rate trends and their impact on demand for new homes. If mortgage rates continue to rise, it could lead to a slowdown in construction activity, which could have significant implications for the industry as a whole. It will be important to monitor these trends and adjust business strategies accordingly to mitigate any potential negative impacts.

Originally reported by housingwire.com. ConstructionNews adds analysis for real estate & property readers.