Total mortgage production is expected to fall 16 percent to $1.96 trillion this year, down from an estimated $2.34 trillion in 2007, the Mortgage Bankers Association reported today.
“This would mark the first time since 2000 that total mortgage originations fall below $2 trillion,” the report noted.
The report said total loan origination is expected to fall another four percent to $1.88 trillion in 2009.
The MBA reported that residential purchase mortgage originations will drop by roughly 18 percent in 2008 to $955 billion from an estimated $1.16 trillion last year.
And said that because of tighter underwriting guidelines and falling home prices, refinance originations will decline about 14 percent to $1.01 trillion in 2008 from a projected $1.17 trillion in 2007, and fall a further 13 percent to $883 billion in 2009.
Regarding housing data, the report said total existing home sales for the year will decline by about 13 percent from 2007 to 4.94 million units, but should rise by about four percent in 2009.
Median home prices for new and existing homes are also expected to fall by about two percent this year, but rise between one and two percent in 2009.
The MBA’s Chief Economist Doug Duncan addressed recent capital worries rocking banks, mortgage lenders, and government financiers Fannie and Freddie, but noted that a further credit downturn was unlikely.
“The principal concern of the current credit crisis lies in the possibility that banks will eventually run out of capital. Banks are running up against capital limits as they write down the value of assets at the same time they are putting loans on their balance sheets because the markets for securitized products are essentially closed,” said Duncan.
“Fortunately, the banking system entered the current credit crunch well capitalized, so the danger of a sharp and widespread contraction of credit availability does not seem imminent. The recovery period in financial markets may take longer this time than it has in past financial crises, but a turn for the better still appears to be a good bet later in the year.”
Duncan added that he believes the fed funds rate will be cut at the Federal Open Market Committee meeting later this month, and expects the Fed to focus less on inflationary worries to address concerns about a recession.
He also noted that mortgage rates should continue to remain relatively low, but move slightly higher into 2009.
“The 30-year fixed-rate mortgage yield should trend up only modestly higher over the second half of the year, reaching 6.2 percent by the fourth quarter and edging up just slightly through 2009. Thus, interest rates will still be quite low by historical standards,” said Duncan.
Source: thetruthaboutmortgage.com