An increase from this year to 2017 in the volume of new loans to finance home purchases will be more than offset by a sharp drop in refinance production.
During all of 2016,
residential loan originations are expected to total between 7.6 million loans for $1.756 trillion and 8.5 million loans for $1.936 trillion.
Business is projected to retreat next year, with the forecast ranging from 5.8 million loans funded for $1.403 trillion to 6.1 million loans for $1.478 trillion.
Those predictions were made by iEmergent.
This year’s refinance production is forecasted to range from 3.8 million loans for $0.804 trillion to 4.6 million units closed for $0.984 trillion.
iEmergent highlighted that with unexpectedly low interest rates, “the refinance opportunity has exploded.”
“The most unexpected developments in 2016 have been about interest rates,” the report stated. “Back in December, when the Federal Reserve raised short-term interest rates for the first time in seven years, conventional wisdom suggested that bond rates, and thus mortgage interest rates, would soon follow.
“Instead, the opposite happened.”
While iEmergent doesn’t expect rates to rise over the remainder of the year, if they did — refinances will “fall off sharply.”
Refinance business is expect to sink in 2017 to between 1.5 million loans for $0.333 trillion and 1.9 million closings for $0.408 trillion.
“Refinances will almost assuredly decline sharply, even if rates stay at current levels,” iEmergent said of next year’s refinance outlook. “Rates have been so low for so long that nearly all homeowners able to refinance will have done it by now.”
iEmergent has purchase financing totaling 3.9 million loans funded for $0.952 trillion during all of 2016.
An increase in rates for the remainder of this year would only have a modest impact on purchase-money production.
Purchase financing activity is expected to climb to 4.3 million loans closed for $1.070 trillion during all of next year.
“For 2017, the purchase volume outlook still looks very good,” the report said. “The economic health of homeowners and prospective home-buyers continues to improve with income gains likely to accelerate as labor markets get tighter.”
