A big increase in conventional mortgage business has the first-quarter origination outlook more than $100 billion higher.
Residential originations by U.S. lenders will be $355 billion in the first three months of this year, Freddie Mac predicted in its March 2011 Economic and Housing Market Outlook.
Just last month, Freddie’s forecast called for only $245 billion in first-quarter production.
Home-loan originations will decline to $296 billion in the second quarter and dip below $200 billion in the final period of this year.
Conventional originations were projected to come in this quarter at $270 billion, higher than last month’s prediction of $175 billion. The projection for fundings that are either insured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs was raised to $85 billion from $70 billion.
Including both conventional and government business, 2011 originations are forecasted to reach $1.1 trillion. That’s a $50 billion improvement from last month’s forecast but a big drop from the estimated $1.550 trillion in 2010 production.
Freddie cut its 2012 funding forecast from $1.150 trillion to $1.050 trillion.
The outlook has refinance share falling to just over two-thirds this quarter from 71 percent in the prior period. By the end of this year, the share will be hovering just above a third — though that could change dramatically given the recent declines in mortgage rates.
The share of business that is adjustable-rate will rise to 5 percent from the fourth quarter’s 4 percent then steadily increase to 11 percent by the end of next year.