The chance of a US recession in the next 12 months is a 'coin flip,' says Mortgage Bankers Association

• The chances of a US recession are about 50%, according to the Mortgage Bankers Association.
• A recession is not its baseline forecast, but "it is a coin flip at this point," MBA economists said.

The Mortgage Bankers Association revised its US economy outlook lower and puts the chances of a recession over the next 12 months at 50%.

"[While] a recession is not in our baseline forecast, it is a coin flip at this point, as we estimate a roughly 50% chance that the U.S. could enter a recession over the next 12 months, with the most likely timing being in the first half of 2023," MBA economists said in a news release following its July 2022 Economic Forecast.

The MBA lowered its growth rate for 2022 to 0.6%, compared to last month's forecast of 1.6%.

The group pointed to the Fed's aggressive interest rate path and persistent high inflation as two major stresses for households and businesses, which will present headwinds for growth.

"We expect inflation to end the year at around 6% before declining to a 2% to 2.5% range in 2023 and 2024," the MBA noted.

The Federal Funds rate, the team said, will hit a range of 3.2%-3.5% by the end of 2022. Then, it will climb to a range of 3.75% to 4% by the end of next year.

Home sales, meanwhile, will see a decline of about 8%, the MBA forecasted.

In the economists' words: "Higher mortgage rates have reduced the pace of home sales, and now with the prospect of a weaker economy and an elevated risk of recession, potential homebuyers have pulled back even more."

Meanwhile, mortgage demand last week slipped 6.3% as high prices throttled residential real estate. It was the third straight week of declines, and the lowest reading in 22 years.

In 2022, mortgage rates have roughly doubled, from about 3% to nearly 6%, but home prices have not fallen during the same stretch. Last month, median home prices notched another all-time high, according to the Wall Street Journal.