Three consecutive years of rising home purchase financing has next year’s forecast for purchase mortgage production up more than 40 percent from 2011’s recent low. The outlook for refinance originations, however, is far more dismal.
Residential lenders are expected to originate $400 billion in home loans during the third quarter, down from $560 billion three months earlier.
Mortgage production is then expected to fall to $300 billion in the fourth quarter then inch up to $330 billion in the first three months of next year.
Those projections from Freddie Mac’s August 2013 U.S. Economic & Housing Market Outlook were unchanged from the July outlook.
Freddie has refinance share at 50 percent this quarter, 40 percent in the following quarter and 45 percent in the first-quarter 2014.
Based on refinance share, refinance loan volume is expected to tumble from $392 billion in the second quarter to $200 billion this quarter and $120 billion in the final quarter of this year.
The purchase financing forecast see-saws from $168 billion in the second quarter to $200 billion in the third quarter and $180 billion in the fourth quarter.
Combined production for Federal Housing Administration-insured loans and Department of Veterans Affairs-guaranteed mortgages is predicted to fall from $105 billion in the second quarter to $80 billion in the current three-month period then decline further to $65 billion in the last three months of 2013.
For all of 2013, overall home-loan production is expected to total $1.800 trillion, down from the previous year’s $2.100 trillion. A further decline has next year’s volume at $1.300 trillion.
Based on refinance share of 71 percent for 2012, 62 percent for this year and 40 percent for 2014 — refinance production is forecasted at $1.116 trillion in 2013, lower than $1.491 trillion last year. Next year’s refinances are projected to fall to $0.520 trillion.
Purchase financing, which amounted to $0.609 trillion last year, is expected to climb to $0.684 trillion in 2013 and $0.780 trillion in 2014.
Origination of purchase-money loans had been as low as $0.540 trillion in 2011.
Freddie forecasts the share of adjustable-rate mortgages at 10 percent this year, the same as in 2012. But ARM share is predicted to reach 14 percent in 2014.
