The Mortgage Bankers Association (MBA) expects to see $1.19 trillion in mortgage originations during 2015, a 7 percent increase from 2014. While MBA anticipates purchase originations will increase 15 percent, it expects refinance originations to decrease 3 percent.
MBA’s forecast predicts purchase originations will increase to $731 billion in 2015, up from $635 billion in 2014. In contrast, refinances are expected to drop to $457 billion, from $471 billion, in 2014.
For 2016, MBA is forecasting purchase originations of $791 billion and refinance originations of $379 billion for a total of $1.17 trillion.
“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, MBA’s chief economist. "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."
MBA's projection for overall economic growth is 2.9 percent in 2015 and 2.4 in 2016, which will be driven mainly by strong consumer spending and business fixed investment, as households continue to spend on durable goods, such as cars and appliances, and as businesses invest in new plant and equipment. After several years of contraction, the rate of government spending should no longer be a drag on the economy.
Additionally, Fratantoni said the MBA expects that the 10-Year Treasury rate will stay below 3 percent 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 percent in the second half of 2015, continuing to increase through 2016," he explained. "We expect the Federal Reserve will keep short-term rates near zero until mid 2015, when we expect to see the first fed funds rate increase."
Monthly job growth will average 220,000 per month in 2015, and that the unemployment rate will decrease to 5.4 percent by the end of 2015 and 5.2 percent in 2016. 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.
“With the recent drop in mortgage rates, some borrowers now have an incentive to refinance and with the home price gains of the last two years more homeowners have enough equity to refinance, so we expect a pickup in refinance application activity over the next few months, which will lead to higher refinance originations in early 2015,” Fratantoni said.
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 (HMDA) data release.