The Mortgage Bankers Association (MBA) expects to see mortgage originations fall from an estimated $1.4 trillion in 2010 to slightly under $1 trillion in 2011, due mostly to a decline in refinance originations. However, the MBA also expects to see an increase in purchase originations next year.
The economy will grow at a slow pace but will see no significant job growth until 2011. The increase in purchase originations will be driven by modest increases in home sales and stabilizing home prices.
In contrast, MBA refinance originations are expected to fall steadily as mortgage rates gradually increase throughout 2011 and 2012.
The MBA predicts that total existing home sales for 2010 will be around 8% lower than in 2009, despite a boost to sales in the first half of the year from the home-buyer tax credit. Existing-home sales are projected to increase modestly in 2011, increasing by a little less than 2%, before increasing by about 16% in 2012. New-home sales for 2010 will be down by about 13% relative to 2009, although the MBA expects a slow recovery in 2011, increasing around 20% from a low base and then increasing 40% in 2012.
‘Economic growth in 2010 has been subdued and this trend will likely continue for most of 2011,’ says Jay Brinkmann, MBA's chief economist and senior vice president for research and economics. ‘Households remain cautious given the weak job market. On top of that, uncertainty regarding tax rates for next year, and the potential for tax withholding to increase at the beginning of the year, led us to forecast that consumer spending will remain weak, particularly in the first half of 2011.’
The MBA also reports that fixed mortgage rates will average about 4.4% in the fourth quarter of 2010, increase to 5.1% by the end of 2011, and head toward 5.7% in 2012. Purchase originations for 2010 will be $480 billion – about 28% below the 2009 level of $665 billion – but the MBA expects them to rise about 30% in 2011, as existing home sales recover and home prices stabilize, and should rise again in 2012 to $877 billion.
Refinance originations will end 2010 at $921 billion – a decrease of 31% from $1.3 trillion in 2009, the MBA adds, while refinance activity will decrease by 60% in 2011 to about $370 billion as mortgage rates increase and the pool of eligible borrowers shrinks, and will fall further to $310 billion in 2012.
SOURCE: Mortgage Bankers Association