Economists at Freddie Mac have reduced their forecast for mortgage originations this year, and refinances took the brunt of the hit. Next year’s outlook was also lowered.
Residential loan originations from all U.S. lenders are expected to drop from $320 billion in the third quarter to $260 billion during the final three months of this year.
The current-quarter forecast was unchanged from last month’s outlook, while the fourth-quarter projection increased from $240 billion.
The McLean, Va.-based company outlined its expectations in its July 2014 Economic and Housing Market Outlook.
But estimated first-half 2014 volume declined to $595 billion from $690 billion previously estimated
Based on Freddie’s revised refinance share, the third-quarter refinance forecast fell to $99 billion from $109 billion predicted in June, while the fourth-quarter projection slipped to $78 billion from $82 billion.
However, the secondary lender lifted its third-quarter purchase forecast by $10 billion to $221 billion, while the fourth-quarter purchase outlook increased $24 billion to $182 billion.
Total originations for all of 2014 are now expected to amount to $1.175 trillion versus the $1.250 trillion predicted last month. Next year’s projection has been reduced to $1.085 trillion from $1.125 trillion.
This year’s prediction for refinance originations has been cut to $0.435 trillion from the $0.500 trillion forecasted in June.
The 2015 refinance projection fell $0.020 trillion to $0.239 trillion.
Freddie has refinance share at 37 percent for 2014 and 22 percent for the following year.
Purchase financing is expected to reach $0.740 trillion this year compared to the $0.750 trillion predicted last month, and next year’s purchase forecast was lowered $0.020 trillion to $0.846 trillion.
Freddie has 2014 FHA/VA share at 20.17 percent, up from 19.36 percent a month earlier. Next year’s government share was unchanged at 20.00 percent.
Adjustable-rate mortgages are expected to account for 12 percent of 2014 originations and 15 percent of 2015 activity.
