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MortgagePoint » Your Trusted Source for Mortgage Banking and Servicing News 30 November 2025 C O V E R S T O R Y and steadily improving affordability to slowly grow the market over time. Q: In markets where you are seeing price declines or stagnation, what patterns stand out? How should lenders interpret those signals for 2026? FLEMING: First, there is a strong geo- graphic pattern. Price growth is slowest or even declining in markets in the Sun- belt and West, particularly markets in Florida, Texas, and California. In many cases, these markets are correcting for an unprecedented pandemic-driven surge in prices. So, while these markets are declining from recent house price peaks, they are far from wiping out all price growth gained in the pandemic. For lenders, the canary in the coal mine is negative equity, which significantly increases the risk of foreclosure in the event of delinquency. More recent buy- ers, who bought at the top of the market with little down and missed the benefit of the pandemic price surge, are the most at risk of being in negative equity. Lenders will be closely monitoring mortgages for negative equity risk. Q: One major structural challenge is the "lock-in effect." How big a drag is that on 2026 transaction volumes, and what might tip it into loosening? It's been a drag ever since the Fed quickly raised interest rates. Because we don't believe mortgage rates will drop dramatically, the rate lock-in effect will remain a headwind, holding back transaction volume in 2026. However, it's a headwind that is slowly weakening as life events spur home sales and slowly but steadily erode the number of home- owners who are rate locked. Q: With the home-buying market perhaps entering a "two-tier" state (those who can afford vs. those who cannot), what role do you see for non-traditional housing models in 2026? FLEMING: Non-traditional paths to homeownership are likely to gain pop- ularity given the affordability strain so many first-time homebuyers are feeling. But it is unlikely that they will become any significant share of ownership types. So, they will amount to a growing, but not large, role in helping people achieve homeownership. Q: From your vantage point, what is the biggest upside risk in the housing market for 2026 and the biggest downside risk? FLEMING: The most significant down- side risk is a reacceleration of house price appreciation and/or a significant increase in mortgage rates. Either would worsen affordability. However, to finish on a positive note, the biggest upside risk is continued household income growth, or even accelerating household income growth, as some of the AI-based productivity gains accrue to workers, causing affordability to improve even faster than we currently expect. MICHAEL FRATANTONI Chief Economist, SVP, Research and Industry Technology, Mortgage Bankers Association Q: For 2026, what is your base case for originations volume (purchase vs. refinance), and what are the key variables that could tilt the outcome? FRATANTONI: We're looking for 8% growth in single-family origination volume, and that's the case whether you look at that on a dollar basis or a unit basis. Some of our members are a little more focused on the dollar number, which we think is going to get to about $2.2 trillion. Some are paid based on how many loans they're doing, so that unit forecast is also really important. We're looking for about 5.8 million loans to be done. If you look at that on a dollar basis, it looks close to average over the past decade or so, but if you look at it on a unit basis, it highlights that it's still a relatively slow market. We are expecting home sales to increase about 5% in 2026, both for new and existing, compared to where we were in 2025. So, it is still a relatively subdued housing market, but we've been getting better each year. If you look at 2023, it was dead calm, hardly any activity at all, and each year has gotten a little bit better. The lock-in effect is still having an impact. You have a lot of owners out there with very low rates on their mortgages, and that is a friction that's keeping them less likely to list their homes, so we're not seeing as many move-up buyers as you would typically see. But we keep highlighting that there are still a lot of millennials out there. There are almost 50 million peo- ple between 30 and 40 in this country, and most of them are still renting, but they are getting to the peak first-time homebuyer age, so we expect, over the next couple of years, that's going to "Non-traditional paths to homeownership are likely to gain popularity given the affordability strain so many first-time homebuyers are feeling. —Mark Fleming SVP, Decision Science and Chief Economist, First American Financial Corporation