MBA forecasts 7% origination jump in 2015

Predicts unemployment at 5.4% by end of next year

The Mortgage Bankers Association is forecasting a 7% increase in mortgage originations in 2015, to $1.19 trillion, with purchase originations rising 15% to $731 billion in 2015, and refinance originations decreasing 3% to $457 billion.

“We are projecting that home purchase originations will increase in 2015 as the U.S. economy continues on its current path of stronger growth, job gains and declining unemployment,” said Michael Fratantoni, chief economist at the MBA. “The job market has shown sustained improvement this year; with robust monthly increases in both payroll jobs and job openings. We are forecasting that strong job growth, coupled with still low mortgage rates, should translate to an increase in home sales and purchase originations.”

The MBA is projecting overall economic growth of 2.9% in 2015 and 2.4% in 2016, driven by strong consumer spending and business fixed investment as consumers spend on durable goods and businesses invest in equipment.

“Moreover, after several years of contraction, the rate of government spending should no longer be a drag on the economy,” Fratantoni said.

“We expect that the 10-Year Treasury rate will stay below 3% through the first half of next year as concerns about broader global issues have caused a flight to quality, with investors seeking safety in US Treasury securities. However, if the global turmoil diminishes and U.S. economic growth continues, we anticipate the rate will exceed 3% in the second half of 2015, continuing to increase through 2016.”

The MBA said it expected the Federal Reserve will keep short-term rates near zero until mid 2015, when they expect to see the first Fed funds rate increase.

“We forecast that monthly job growth will average 220,000 per month in 2015, and that the unemployment rate will decrease to 5.4% by the end of 2015 and 5.2% in 2016,” Fratantoni said.

"While part of the decrease in the unemployment rate in 2014 has been driven by lower labor force participation, we have seen payroll growth outpace population growth and a declining number of unemployed workers. Our anticipation is that as the economy grows, more workers may return to the work force to seek employment, and this will temper the decline of the unemployment rate.”

The MBA is predicting a rise in refinance application activity in the short term, due to the recent drop in mortgage rates and the fact that many homeowners have gained equity in their houses over the last few years.

MBA upwardly revised its estimate of originations for 2014 to $1.11 trillion from $1.01 trillion, and for 2013 to $1.85 trillion from $1.76 trillion, to reflect the most recent data reported in the 2013 Home Mortgage Disclosure Act data release.

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