Broad economic growth in the US got off to a slow start to 2015, with a stronger US dollar, lower exports, and trade/inventory disruptions on the West Coast serving as headwinds, according to the latest forecast from the Mortgage Bankers Association.

“We still believe that some of these are temporary factors and that domestic growth will pick up in the second quarter, given that the job market remains strong and there has been upward pressure on wage growth,” MBA says in its forecast.

On the issue of rates and originations, the association is optimistic for the remainder of 2015.

“Because rates have been low for most of 2015 until recently, we revised our refinance originations estimate upward for both the first and second quarters due to higher than expected MBS issuance data and strong refinance applications in the months of February, March, and April. Refinances are expected to be $551 billion in 2015, compared to a previously estimated $510 billion,” MBA writes. “We now estimate a total of $1.28 trillion in mortgage originations for 2015, compared to $1.12 trillion in 2014. Purchase originations are expected to increase to $730 billion in 2015 from $638 billion in 2014.”

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(Source: MBA)

The BEA’s advance estimate of first quarter growth was a paltry 0.2%, the slowest quarter of growth since the first quarter of 2014, but MBA says that they and other analysts are increasingly convinced the BEA doesn’t properly account for seasonal factors in its adjustments.

MBA acknowledges the weakness in the labor market, but says there are signs things may be improving.

“We also saw a weak employment picture in the first quarter, at least on the surface, with job growth from January to March averaging 184,000 jobs added per month, which was significantly weaker than in 2014, where the monthly average was 260,000 jobs added. However, April’s payroll numbers saw a rebound to 223,000 jobs, possibly a sign that the previous months’ weakness is over,” they write.

They’re holding course on what they think will happen with interest rates – expecting rates to climb through 2015 and that the “Fed will raise rates in September as the economy and job market continue to strengthen.

“Interest rates trended down throughout 2014, started out low in 2015, but have trended higher in recent weeks.  Our forecast for the 10 Year Treasury yield is 2.3% for 2015 and 3.0% for 2016, and our forecast for the 30 Year Fixed mortgage rate is for 4.1% in 2015 and 4.9% in 2016. Given a weaker first quarter of 2015 in terms of economic and job market indicators, we expect that the Federal Reserve will make its first increase of the fed funds rate in September 2015,” MBA writes.

As for their big forecast – on originations – they are positive.

 “We estimate a total of $1.28 trillion in mortgage originations for 2015, compared to $1.12 trillion in 2014.  Purchase originations will drive the increase, increasing to $730 billion in 2015 from $638 billion in 2014. Refinances are expected to be to $551 billion in 2015. As mentioned earlier … we revised our refinance estimate upward for both the first and second quarters in response to higher than expected issuance data and strong refinance applications in the months of February, March, and April. For 2016, we expect $791 billion in purchase originations,” MBA writes. “However, rates will likely continue to rise and cause refinances to decline to $379 billion for a total of $1.17 trillion in origination volume in 2016.”