iEmergent has issued its second quarter update to the 2011-2015 U.S. Total Mortgage Volume Forecast, projecting that residential mortgage lending volume will fall below the $900 billion mark in 2011. Highlights of the national forecast indicate that 2011 home financing activity will remain mired in a sluggish trough in 2011, with very slow growth prospects for 2012 through 2015:
►2011 Total Purchase Volume:
• 2.592 million loans for $476.6 billion
►2011 Refinance Volume Range:
• 2.068 million loans for $384.8 billion (low)
• 2.503 million loans for $465.8 billion (high)
►2011 Expected Total Mortgage Volume:
• 4.660 million loans for $903.8 billion (low)
• 5.095 million loans for $942.4 billion (high)
The latest volume projections represent an estimated 38 percent decrease in total originated dollars from estimated 2010 end-of-year volumes, due mainly to lower expected loan sizes and a 34 percent drop in projected refinance volumes. 2011 purchase dollar volume is now slated to drop by 3.4 percent from estimated 2010 end-of-year levels even though loan units are expected to be flat. The 2011 purchase/refinance split will be approximately 53 percent/47 percent.
According to the Mortgage Bankers Associaiton (MBA) Mortgage Finance Forecast in late April, in 2010, refinances were at 70 percent. Since 1990, the average rate of refis annually stood only at 44 percent. Meanwhile, the MBA has forecasted the purchase market to rise from $473 billion in 2010 to $558 billion in 2011, and experiencing a nearly 70 percent two-year rise to $730 billion in 2012.
“The home finance industry is pinning too much hope on short-term, supply-side headlines that trumpet the wishful thinking of low rates, low prices, high affordability and lots of available inventory," said Dennis Hedlund, president of iEmergent. "But households are trapped. Middle-class homeowners won’t buy because they can’t sell without big losses. They can’t re-finance because they can’t qualify. Add millions of the unemployed who have limited prospects of finding a job in the near-term, unless it’s part-time or pays less than what they were used to, and you have a formula that bodes poorly for home lending in the next two to three years. A quick turnaround in this environment requires a rapid rebound of demand, not supply."
The rates at which individual local markets and household segments generate purchase mortgages remain far below historical trends. Forty-one percent of all U.S. households are now no longer part of the remaining 2011 pool of potential homebuyers who might be eligible, able and willing to purchase or refinance a home. Purchase money mortgage applications, pull-through rates and closings have continued to languish through of a lending year that is now half complete. Refinance demand has popped-up for brief periods, but future waves will continue to diminish as the available homeowner household pool shrinks.
“Jobs–better jobs–not austerity, are what’s needed to change the situation," said Hedlund. "Without jobs, the next six months of home financing don’t look very encouraging. For all lenders, this zero-sum competitive environment will get tougher before it gets better.”