iEmergent, a Des Moines, Iowa-based market research, forecasting and advisory services firm for the financial services, mortgage and real estate industries, has issued its 2011-2015 U.S. Total Mortgage Volume Forecast, projecting that U.S. residential mortgage lending volume will fall below the $1 trillion mark in 2011, becoming the fifth year of what is emerging as a “lost decade” for the housing and home financing industries, with slow growth also expected for 2012-2015.
The 2011-2015 forecasts come at a crucial time for the banking and mortgage lending industries as homebuyers and housing markets continue to struggle. Highlights of the national forecast include:
2011 Total Purchase Volume
2.62 million loans for $490.9 billion
2011 Refinance Volume Range
►2.18 million loans for $412.9 billion (low)
►2.63 million loans for $499.8 billion (high)
2011 Expected Mortgage Volume Range
►4.80 million loans for $903.8 billion (low)
►5.25 million loans for $990.7 billion (high)
These projections indicate that housing and home financing will continue in recession, with an estimated 17 percent decrease in total origination volume from end-of-year 2010 total volume estimates. This decrease in total volume is mainly due to a 29 percent drop in projected refinance volume from 2010-2011, while purchase is predicted to drop only slightly by 0.5 percent from 2010 end-of-year volume.
Thirty-eight percent of all U.S. households are no longer part of the 2011 pool of potential homebuyers who might be eligible, able and willing to purchase or refinance a home. As a result of the 2007-2010 economic collapse, the total available homebuyer pool has been reduced to levels similar to those from 1995—a key factor in the weak 2011 forecast.
“The home financing industry is now caught in a serious ‘demand trap,’ a negative feedback loop of economic and behavioral deflation. Similar to the liquidity trap that spawned it, mortgage rates have reached unprecedented low levels, yet purchase money mortgage demand languishes as prime home buyers are trapped by cumulative downward economic and job pressures,” said Dennis Hedlund, president of iEmergent. “Without a real growth in consumer demand that's also tied to real growth in jobs and the re-employment of millions of Americans, the demand trap will be very difficult to escape. Refinance demand may pop up for brief periods, but elevated volumes will be unsustainable and will diminish over time as the remaining household pools shrink faster than they can be replenished. Demand can’t be created from households that can’t buy.”
iEmergent’s forecasts suggest that 2011-2015 will create considerable market and volume risks for lenders of all sizes, especially those that have been relying heavily on refinance transactions for the past two years. Furthermore, Hedlund warns that “without evidence-based intelligence that quantifies the shifting growth and behavior of lending opportunities in individual markets and communities, lenders face the very real prospect of falling into a self-induced, long-lasting and potentially debilitating ‘performance trap,’ a cycle of stagnation that loses customers, thwarts recovery and leads to chronic underperformance .”
The 2011-2015 forecast and the business development and performance tools that incorporate it are now available to lenders and organizations of all types and sizes.
For more information, visit www.iemergent.com.