Mortgage Originations to Fall Under $1 Trillion in 2011 says MBA

Mortgage originations are expected to fall from an estimated $1.4 trillion in 2010 to slightly under $1 trillion in 2011 according to the latest forecast from the Mortgage Bankers Association.

The industry will see an increase in purchase originations driven by modest increases in home sales and stabilizing home prices.  In contrast, MBA refinance originations are expected to fall steadily as mortgage rates gradually increase throughout 2011 and 2012.

“Economic growth in 2010 has been subdued and this trend will likely continue for most of 2011. Households remain cautious given the weak job market.  On top of that, uncertainty regarding tax rates for next year, and the potential for tax withholding to increase at the beginning of the year, lead us to forecast that consumer spending will remain weak, particularly in the first half of 2011,”  said Jay Brinkmann, MBA’s Chief Economist and Senior Vice President for Research and Economics.

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The MBA is forecasting the unemployment rate will increase from the current level of 9.6 percent to 9.9 percent by the first quarter of 2011, end 2011 at 9.5 percent, then fall to 8.7 percent by the end of 2012. Mortgage delinquency and foreclosure rates should track this downward trend in the unemployment rate.

“Various factors are driving our rate forecast.  The sluggish economy, weak private demand for debt financing, and low inflation are keeping downward pressure on rates,” said Brinkman.

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  • When was the last time that there was a declaration that a recession has ended when after four years unemployment is projected to remain over 8.6% without consideration of those who have been written off of the unemployment calculation due to long-term and systemic unemployment and those who are underemployed?

    Anemic is far too polite of an adjective to describe this alleged “recovery.” The closest similar situation is the four years of malaise under President Carter. How odd to compare the four year Administrations of a white southern peanut farmer who became a nuclear submarine Lieutenant in the Navy to that of a black northern lawyer who became a community organizer and has no military experience. Yet there are many similarities including their pro union vice presidents Mondale and Biden. It took even President Reagan 2 years to turn things around. So a real turn around could be another four years away.

    How much the projected declines in refinance and marginal increases in home purchases will impact the reverse mortgage market cannot be determined from this outlook. But a near 30% decrease in total projected fundings of all mortgages cannot be a positive sign. I hope John Lunde is right and we are once again the bright spot in the mortgage industry with a 40% increase in volume. My outlook is not as bright.

    The hardest economic projection to find anything positive about in the next few years is the expectation that the shadow foreclosure inventory may come to market over the next 18 months. If that is true, expectations are the values of homes nationwide will move down.

    I expect to hear about focusing on negative reports, being little more than a hanger of black crepe, etc. BUT we suffered a huge loss in the number of transactions over the last fiscal year. For twelve months we heard the nonsense of those who proclaimed that cynics were nothing more than naysayers and if we all worked just a little smarter and harder we would see the same numbers as the fiscal year before. Perhaps sales managers have waked up although in some cases it is EXTREMELY doubtful. Unfortunately the voices of the cynics were also the only voices of reason over the last fiscal year.

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