The Mortgage Bankers Association (MBA) announced that it expects to see $1.2 trillion in mortgage originations during 2014, a 32 percent decline from 2013. While MBA expects purchase originations to increase nine percent, it expects refinance originations to fall 57 percent.
MBA also upwardly revised its estimate of originations for 2013 to $1.7 trillion from $1.6 trillion to reflect shifts in lender market shares reported in the latest Home Mortgage Disclosure Act (HMDA) data release.
MBA expects that purchase originations will increase to $723 billion in 2014, up from $661 billion in 2013. In contrast, refinances are expected to drop to $463 billion from $1.08 trillion in 2013.
For 2015, MBA is forecasting purchase originations of $796 billion and refinance originations of $433 billion for a total of $1.2 trillion. Jay Brinkmann, MBA’s chief economist and senior vice president for Research and Education released the following statement highlighting key points of the forecast:
“We are projecting home purchase originations will increase in 2014 due largely to gains in home sales and home prices. We expect to see a decline in the share of sales paid for with cash, and higher average LTVs on purchase mortgages, due to the rise in home prices.
“We expect mortgage rates will increase above 5 percent in 2014 and then increase further to 5.3 percent by the end of 2015. As a result, mortgage refinancing will continue to drop, and borrowers seeking to tap the equity in their homes will be more likely to rely on home equity seconds rather than cash-out refinances. We will potentially see a small increase in refinances toward the end of 2015 as the Home Affordable Refinance Program 2.0 (HARP) expires but HARP activity during 2014 will still be low. While on paper the number of HARP-eligible borrowers appears large, the reality is these borrowers have been unresponsive to numerous attempts to encourage them to participate in the program and are less likely to do so now that rates have gone up.
“We revised our origination estimates for 2012 and 2013 based on the 2012 HMDA data released in September 2013. The data showed a higher share of originations going to independent mortgage lenders, particularly purchase mortgages. In 2012, 40 percent of the purchase volume was originated by independent mortgage companies, up from 36 percent in 2011.
“Our forecast for the increase in the purchase market is based on our expectations for ongoing improvements in the broader economy and the jobs market. We are projecting overall economic growth to be 2.4 percent in 2014 and 2.7 in 2015, supported mainly by increases in consumer spending and residential fixed investment. GDP growth will remain relatively weak through the end of 2013 and early 2014, at around two percent, due to a variety of uncertainties, particularly over US spending and tax policies linked to the debt limit debate. Our expectation is that the economy will grow somewhat faster in the second half of 2014 as some of these issues are resolved.
“The 10-Year Treasury rate is expected to stay below three percent for the remainder of 2013 and into early 2014, but then increase more rapidly in the second half of 2014 as the Fed tapers its asset purchases and subsequently phases out the third round of quantitative easing (QE3). We now expect the Fed to begin tapering its asset purchases in early 2014, and ending QE3 in September 2014. The Fed funds rate will be kept near zero until mid 2015, when we expect to see the first fed funds rate increase.
“Unemployment is expected to continue on a downward path due to falling labor force participation and job growth in the range of 150,000 to 170,000 jobs per month. We expect the unemployment rate will decrease to 6.9 percent in 2014 and 6.4 in 2015.”
