MBA Revises Origination Projections Updwards for 2012, 2013

The Mortgage Bankers Association’s (MBA)rnchief economist echoed much of what Freddie Mac’s economists said this afternoon</aas he hiked MBAs estimates for mortgage originations both this year and inrn2013.  Jay Brinkmann said he expects tornsee the value of originations hit $1.7 trillion this year and $1.3 trillion inrn2013.  Next year’s increases will berndriven by a spillover of refinances from 2012 into the first half of 2013.</p

The economist said he thought it was likely that thernpurchases of mortgage backed securities (MBS) by the Federal Reserve in its QE3rnprogram will keep mortgage rates below 4 percent through the middle of nextrnyear.  “Given our expectation thatrnoriginations will be front-loaded in the first half of 2013, the Fed’srnpurchases during the second half of 2013 could approach 50 percent of allrnmortgages originated in the last six months of the year, obviously with therneffect of holding down rates, although there is a possibility that the Fedrncould shift into Treasury securities before the end of 2013,” Brinkmann said. </p

“The originations forecast is based onrnexpectations of very modest increases in economic growth in 2013 relative torn2012, but growth nonetheless,” he continued.  “We expect gross domesticrnproduct to rise 2.0 percent in 2013 versus only 1.6 percent in 2012, aboutrnequal to the growth rate in 2011 but well below the 3.1 percent growth rate wernsaw in 2010.  The growth will be driven by a combination of the biggestrnannual increase in residential fixed investment we have seen since 1992, asrnwell as small increases in consumer spending and business investment.”</p

Brinkman said he expects unemployment to remainrnaround 8 percent until the middle of next year before falling to 7.8 percent byrnthe end of 2013.  The broader measures ofrnunemployment that are most predictive to the demand for housing are going tornremain stubbornly high with private sector job growth staying in the range ofrn125,000 to 150,000 jobs per month, well below what we need for a robust marketrnin home sales, construction, and purchase originations.</p

He said there are a number of threats facing therneconomy the most immediate being the so-called fiscal cliff which could bringrnboth large tax increases and spending cuts at the first of the year.  The tax increases in particular would be devastatingrnto economic growth and if Congress doesn’t act to stave them off the entirernweight of these events could cut 3.5 to 4 percent off of MBA’s forecasts.           </p

“While the fiscal cliff is the most immediaternthreat, it is at least one we can control, Brinkmann concluded.  “Thernothers are primarily international and pose longer-term headwinds for the USrneconomy.  These include the ongoing economic slowdown in the Europeanrneconomies and how the fiscal problems in southern Europe will be resolved; thernslowdown in growth in China and the cascading impacts on Japan, Taiwan,rnAustralia, New Zealand and the countries of southeast Asia; and the prospectsrnof a war involving Iran and Israel and the response of the other countries inrnthe Middle East and the impact on world oil prices.”

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