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.

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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