While it may be small, the mortgage market is still showing subtle signs of strength, beating original expectations for the year, a new industry report from FBR & Co. said.
For starters, the $253 billion in purchase originations in the second quarter of this year represents the strongest single quarter for industry originations since 3Q07.
The Mortgage Bankers Association recently forecasted a 7% increase in mortgage originations in 2015, growing to $1.19 trillion, with purchase originations rising 15% to $731 billion in 2015, and refinance originations decreasing 3% to $457 billion.
FBR also noted that Inside Mortgage Finance revised its mortgage origination estimates upward 11% for the first half of 2015, from $805 billion to $895 billion, and its purchase origination estimates up 16%, from $361 billion to $418 billion.
As a result, FBR estimates 2015 purchase volumes to demonstrate continued improvement and end at more than $800 billion for the year.
“This, in our view, implies a strong run-rate for the industry into 2016 on the purchase side, particularly given the gradual recovery in the overall economy. We continue to believe that a normalized market of $1.5 trillion is closer than it appeared earlier in the year,” the report said.
As for next year, during a press conference at its annual meeting in San Diego, the MBA said it expects a 10% increase in purchase mortgage originations next year compared to 2015.
While the MBA estimates purchase mortgage originations to reach $905 billion, refinance originations are predicted to decrease by one-third, resulting in refinance mortgage originations of $415 billion.
The two main positives that FBR noted in its report is the four-quarter origination average and the total market size of lending.
We believe the most striking data point out of Inside Mortgage Finance's revised origination totals for the first half is that it takes the four-quarter average to $210 billion from $190 billion for purchase volumes. This represents the best-sustained purchase volume since the trailing four- quarter average in 2Q08.
Total market size:
Total market size of $1.7 trillion could equal 2012/2013 peaks. This has been a boon for originators, who have profited off the robust volumes, and a bust for servicers or asset purchasers who have had the value of their mortgage servicing rights decline from high prepayment speeds.