For the second consecutive month, the outlook for purchase mortgage production has been reduced, while expected refinance originations were again raised. Adjustable-rate mortgages are expected to account for a growing share of business.
During the first three months of 2013, residential loan originations are projected to total $460 million. Business is expected to rise to $480 billion in the second quarter then decline each of the following two quarters.
The overall outlook was unchanged from the prediction made last month.
Freddie Mac, which issued the forecasts, has refinance originations falling from $345 billion in the first quarter to $336 billion in the second quarter. The secondary lender lifted its outlook from December, when refinance volume was expected to fall from $322 billion to $312 billion.
The corresponding refinance share is expected to be 75 percent in the first quarter and 70 percent in the second quarter. Both quarters were 5 percentage points higher than in last month’s forecast.
But the news wasn’t so good for home purchase financing, which Freddie expects will respectively be $115 and $144 billion in the first and second quarters versus the $138 billion and $168 billion forecasted a month earlier.
The share of first-quarter business that is projected to be insured by the Federal Housing Administration is 18 percent, while the expected second-quarter share is nearly 20 percent. Freddie made no changes to forecasted FHA share from its December outlook.
ARM share, which was 8 percent in the fourth quarter, is expected to rise to 10 percent in the first quarter then increase 1 percentage point each quarter for the remainder of the year. Freddie’s prediction for ARM share was unchanged from the prior outlook.
Full-year production is expected to fall from $2.00 trillion in 2012 to $1.700 trillion next year and $1.250 trillion in 2014. That was the same prediction made by the McLean, Va.-based company last month.
As was the case with the quarterly forecast, the annual outlook for refinance originations was increased — to $1.105 trillion for 2013 from the previous forecast of $1.020 trillion. Next year’s refinance projection was increased to $0.563 trillion from $0.500 trillion.
Full-year 2014 refinance share was increased to 65 percent from 60, while the 2014 expected share increased to 45 percent from 40 percent.
On the other side of that equation, the 2013 purchase forecast was reduced to $595 billion from $680 billion, and the 2014 forecast was cut to $688 billion from $750 billion.
Expected full-year FHA share is 20 percent for 2013 and 2014, the same as forecasted last month.
ARM share is predicted to widen from 12 percent this year to 15 percent next year. There was no change from last month’s outlook.
