MBA Reduces 2010 Origination Outlook Again. Home Prices to Stabilize in Spring
It was only a month agornthat the Mortgage Bankers Association (MBA) projected that the industry wouldrncomplete about $1.5 trillion in mortgage originations in 2010 compared to $2.0rnin new mortgages in 2009. This 25rnpercent decline was bad news at the time, but the MBA's Mortgage Finance Commentary released this morning paints an even grimmerrnoutlook.
The new figures call for a decline in mortgage originations to their lowestrnlevel in a decade, a drop of 40 percent over the 2009 figure. The forecast isrnnow for a total of $1.3 trillion mortgage originations this year compared to anrnupdated estimate of $2.1 trillion in 2009.
In the original estimate releasedrnon December 14, purchase originations during the year were estimated tornincrease from $718 billion to $804 billion. The new report still anticipates anrnincrease in the origination of these mortgages, but only from an updated figurernof $742 billion in 2009 to $776 billion this year. This slight increase will bernoverwhelmed by plummeting originations for refinancing, projected to fall fromrn$1.372 trillion to $502 billion this year. The original projection was for refinancingrntotally from $1.246 trillion to $693 billion.
The report said that datarnshowing strong existing home sales in November reflected expectations that thernhomebuyer tax credit was ending but that home sales are likely to continue tornadjust downward in upcoming months in spite of the fact that the tax credit wasrnextended.
The associationrnsaid that it is difficult to analyze data on current marketing conditionsrnbecause cyclical swings are obscuring seasonal movements. Because of this difficulty in untangling therntwo competing factors, MBA is taking some of the recent improvements in housingrnmeasures “with a grain of salt” as they may merely reflect seasonalrnimpacts. With that in mind, the forecast projected declines in home pricesrnthrough the winter but showing some signs of stabilization in the spring. Still, a return to more typical rates ofrnappreciation should not be expected until 2012.
The FederalrnReserve will meet their commitment to purchase $1.25 trillion in agency MBSrnduring the first quarter and will not be likely to raise interest rates thisrnyear. The report projects that ratesrnwill increase by about a percentage point over the year, ending at just 6.1rnpercent as a result of widening mortgage spreads and an increase in treasuryrnrates driven by federal budget deficits. Once the Fed stops buying MBS, yieldsrnwill have to increase before private investors come back into the market
Both singlernfamily and multi-family housing starts increased during November. The former were up 2.1 percent to arnseasonally adjusted rate of 482,000 units. Multi-family starts rose 62.7rnpercent to 83,000 units, but this was coming off of a 40 year low of 51,000rnstarts in October. Permits for singlernfamily construction were issued for 469,000 units on a seasonally adjustedrnannual basis. This is a 4.5 percentrnincrease over October figures.
Seasonallyrnadjusted sales of existing single family homes increased to 6.54 million unitsrnin November, 7.4 percent higher than October sales and 44.1 percent higher thanrnin November of 2008. While sales wererndown on a non-adjusted basis by about 5 percent from October, the seasonally-adjustedrnsales represented the fastest pace of existing home sales since February 2007. Thernreport cautioned against expecting that pace to continue. “For the fullrnyear 2010 we are expecting about 5.4 million existing home sales. rnNevertheless, this was good news for the housing market.”
Inventories ofrnexisting home continue to decline, driven by an increase in sales and fewerrnhomes being listed. The current inventory declined from a 7 month supply to arn6.5 month backlog in November and the number of units available fell from 3.6rnto 3.5 million.
New home salesrnas reported by the Census Bureau declined 11.3 percent in November to arnseasonally adjusted annual rate of 355,000 homes. New home inventoriesrnalso continued to fall to 235,000 in November from 240,000 in October which MBArncalled “an extremely low number of new homes on the market relative tornhistorical trends.” The slowing pace of sales, however, boosted thernabsorption rate of that inventory from 7.2 months in October to 7.9 inrnNovember. The report projected that new home sales will gradually increase fromrnthese low levels through 2010, ending the year at around 412,000 in new homernsales.
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