The Mortgage Bankers Association (MBA) yesterday reaffirmed its outlook for mortgage originations in the second half of 2013, but revised its forecast for national economic growth.
For the second half of 2013, MBA expects originations to total $606 billion, up from the $527 billion it had forecast at the beginning of the year.
While MBA’s projections were up from the its forecast from the beginning of the year, they were considerably down the estimated $976 billion in originations during the first half of the year.
The increase in the forecast, according to MBA, is due almost entirely to carryover refinance loans originated during the second quarter that will close in the third quarter.
Part of the reason for the increase for refinance originations for the third quarter, according to MBA Chief Economist Jay Brinkmann.
“Loan applicants were doing whatever they could to protect their locked-in rates so the applications volume at the end of the second quarter translated into a higher number of fundings in July,” he said.
Purchase loan originations during the second half of the year are expected to total $312 billion, compared to the $299 billion originally forecast by MBA.
“As we said at the beginning of the year, the big unknown for origination volumes was the timing of the market reaction to any statements from Federal Reserve officials regarding the phasing out of quantitative easing and the impact on refinance volumes,” said Brinkmann.
While the magnitude of the rate increase was larger than what MBA had forecasted, added Brinkmann, the timing of the increase and the impact on refinance volumes was in line with what MBA expectations.
As for economic growth, MBA expects growth to average 2.2% in the second half of 2013 versus the 2.4% originally forecast, citing declines having to do with reduces fixed residential investment and reduced government expenditures.
“Overall economic growth will be slower than originally forecast and we were not forecasting particularly robust growth to begin with,” said Brinkmann.
There are still several unknowns impacting economic growth, notes MBA, such as inflation, the unemployment rate, as well as economic and political situations overseas in Europe and the Middle East that could affect oil prices.
“Against this backdrop, we expect to see employment grow in the range of 175,000 jobs per month. However, a greater share of these jobs has been part-time or lower wage,” said Brinkmann. “The result is that we are unlikely to see these increases in jobs translate into the same household formation rates and demands for homes that we saw in the past for similar increases.”
Written by Jason Oliva