According to a report by the Mortgage Bankers Association (MBA) and DSNews, economic growth will continue through the rest of 2009, but will slow down in the first half of 2010 under the weight of continued unemployment, before resuming a sustained pace and recording a 3 percent gain for all of 2010, the Mortgage Bankers Association (MBA) forecasts.
For all of 2009, the economy will show a decline of 0.5 percent, the group predicted.
Unemployment will continue to climb from its current 9.8 percent, to peak at 10.2 percent in the second quarter of next year, the group said.
Mortgage originations should reach $1.5 trillion in 2010, MBA said, depending on how much interest rates increase and dampen activity in the refinancing market. Modest increases in home sales should drive purchase originations, the group said.
“Perhaps the biggest unknown is the level and volatility of interest rates,” said MBA chief economist Jay Brinkmann.
While the lack of inflation, high unemployment, and excess capacity in the economy should hold interest rates down, the termination of the Federal Reserve’s purchase of mortgage-backed securities will put upward pressure on all long-term rates as well as the spread between mortgage rates and Treasuries, he said.
“The size of any resulting rate move will largely determine the size of the refinance market,” Brinkmann said.
The MBA forecasts fixed mortgage rates will average about 5 percent in the fourth quarter of 2009 and increase to 5.6 percent by the end of 2010.
Other highlights of the forecast:
• Total existing home sales for 2009 will end up about 2 percent higher than those for 2008, and will increase by about 11.2 percent in 2010.
• New home sales for 2009 will be down by about 18 percent from 2008, though sales seemed to have bottomed in the first quarter of 2009 and have been rebounding since then. For 2010, new home sales should increase about 21 percent from 2009’s low levels.
• National average home price declines should abate by early 2010, but will vary by state and home value. Demand will be highest for entry-level homes.
• Purchase originations for 2009 will be $718 billion, about 2 percent below $731 billion in 2008. Purchase originations should rise about 12 percent in 2010, as existing home sales recover and home prices stabilize.
• Refinance originations will end 2009 at $1.245 trillion, up about 60 percent from $777 billion in 2008. Refinance activity will likely decrease in 2010 to about $745 billion as mortgage rates increase.
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