Home mortgage projections for year 2013
Many prospective homebuyers are still sitting on the fence watching trends regarding home prices and mortgages. They’re waiting for the most strategic time to make their purchase.
These consumers will be particularly interested in a study recently concluded by the Mortgage Bankers Association (MBA). It projects key factors that will shape mortgage availabilities in 2013.
MBA expects $1.3 trillion in mortgage originations during the coming year, largely driven by a spillover of refinances into the first half of the year. The association upwardly revised its estimate of originations for 2012 to $1.7 trillion.
MBA expects purchase originations to climb to $585 billion in 2013, up from a revised estimate of $503 billion for 2012. In contrast, refinances are expected to fall to $785 billion in 2013, down from a revised estimate of $1.2 trillion this year.
“We expected 2012 originations to be front-loaded in the first half of the year, with refis falling off with rate increases. Instead, we saw the refinance market grow during the year due to a combination of low rates and adjustments in the HARP and FHA refinance programs,” said Jay Brinkmann, MBA’s Chief Economist.
“We expect 2013 refinance originations to play out like our original expectations for 2012, with a long tail of refis extending through the first half of the year followed by a rapid drop off in the second half.
“In contrast, we expect a 16 percent increase in purchase originations in 2013 over 2012, with every quarter in 2013 exceeding the same quarter of 2012. The increase in purchase volumes will be driven by continued modest growth in the economy, an increase in owner-occupied sales financed with mortgages as opposed to cash purchases by investors, an increase in new home sales and a small increase in average home prices.
“Mortgage rates are likely to stay below 4 percent through the middle of 2013, principally due to the announced ongoing purchases of mortgage-backed securities by the Federal Reserve. There is a possibility that the Fed could shift into Treasury securities before the end of 2013,” Brinkmann said.
Q: Is the “shadow inventory” of homes still growing?
A: No, that inventory is now diminishing.
The nation’s shadow inventory — or supply of delinquent and distressed homes not yet on the market — fell 10.2 percent from a year ago, according to the real estate data firm CoreLogic.
“Overall, the nation had 2.3 million homes sitting on the sidelines that were either seriously delinquent, in foreclosure or real estate-owned in July,” it was reported. “That is down from 2.6 million properties a year earlier, suggesting the backlog of distressed assets has moved in a year, making the shadow inventory a less daunting threat to the marketplace.”
Q: To what extent do mortgages contribute to our GDP?
A: A recent report from Freddie Mac states that housing contributed 0.3 percentage points to the first half of 2012 gross domestic product (GDP) growth of 1.7 percent (annualized) and will likely add a similar boost during the second half of the year after being a net drag on GDP from 2006-2010.
The report also projects 7 million borrowers will refinance in 2012, resulting in an aggregate of $15 billion in mortgage payment savings over the first 12 months after the refinance, a substantial infusion of funds to help strengthen savings and consumption spending by owners.
Freddie Mac anticipates a favorable interest rate environment to remain through the end of this year and into next with the 30-year fixed-rate mortgage averaging around 3.50 percent.
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