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 2012-2016 U.S. Total Mortgage Volume Forecast projecting that 2012 U.S. total residential mortgage lending volume could fall as far as 23 percent below the estimated $1.1 trillion in total volume currently expected for 2011. The totals indicate that housing and home finance will continue to struggle even if the economy starts to turn slightly toward recovery. Highlights include:
►2012 Total Purchase Volume: 2.14 million loans for $406 billion
►2012 Refinance Volume Range: 2.00 million loans for $419.6 billion (low)/2.42 million loans for $508 billion (high)
►2012 Expected Total Mortgage Volume: 4.14 million loans for $825.6 billion (low)/4.56 million loans for $914 billion (high)
The projected 2012 purchase volume of $406 billion represents a 1.49 percent decrease from estimated purchase volume for 2011, marking the sixth straight year in which purchase mortgage volume has been mired in recession. Furthermore, the 23 percent decrease in total volume is due to an expected drop in refinance activity. Although low mortgage interest rates and the expansion of refinance opportunities to include more homeowners through HARP Phase II may stimulate periods of greater refinance activity, elevated refinance volumes will be unsustainable.
“Many experienced economists and banking leaders believe that when GDP gets back on a modest growth track, pent-up homebuying demand and a rapid growth in household formations will quickly trigger a home financing resurgence. Yet this year, even as mortgage rates have reached unprecedented low levels, purchase mortgage demand still languishes as homebuyers are trapped by debt loads, a still-sluggish economy and persistent job anxieties,” said Dennis Hedlund, President of iEmergent. "The year 2012 and the next four years will continue to create considerable market, volume and revenue risks for lenders of all sizes."
The rates at which individual local markets and household segments generate purchase mortgages are the lowest in 20 years, as the banking and mortgage industry continues to be faced with a litany of reputational issues, and significant economic obstacles remain for U.S. households. As a result of the housing collapse that began in 2007, the total size of the available household pool has now fallen to levels last seen in 1994. Forty percent of all U.S. households are no longer part of the 2012 pool of potential homebuyers and homeowners who might be eligible, able, willing and ready to purchase or refinance a home.
“American consumers no longer have the resources or the spending power to propel the economy out of danger. The longer that households struggle to stabilize the basic needs of their lives, the more their confidence in institutions and future economic opportunity will wane. As a result, mortgage loan transactions will diminish as household pools shrink faster than they can be replenished.”