Economists at Freddie Mac have overhauled their estimates for mortgage originations from last year through next year, with an aggregate increase of $280 billion.
Freddie predicts that
home lending by all U.S. lenders will fall from $400 billion during the third quarter of this year to $300 billion in the final quarter and $280 billion in the first three months of next year.
That is more optimistic than last month, when the secondary lender projected that loan closings would go from $380 billion to $285 billion in the fourth quarter and $260 billion in the first-quarter 2016.
The latest numbers were detailed in Freddie’s September 2015 Economic and Housing Market Outlook.
Based on refinance share, refinance originations are expected to fall from $180 billion in the current quarter to $120 billion in the final three months of 2015. The August outlook had refinances at $152 billion in the third quarter and $100 billion in the following period.
Freddie lowered, however, expected third-quarter purchase financing to $220 billion from $228 billion in the last report, while projected fourth-quarter purchase production is now pegged to come in at $180 billion
versus $185 billion expected in the previous outlook.
The McLean, Virginia-based company went back and raised its full-year estimate of 2014 mortgage originations to $1.350 trillion from $1.250 trillion previously estimated.
This year’s total origination forecast increased to $1.530 trillion from $1.450 trillion, and 2016 business is expected to amount to $1.400 trillion compared to the $1.300 trillion predicted in the last forecast.
A spokesman for Freddie indicated in a written statement that the revision to 2004’s total was a result of Home Mortgage Disclosure Act data that came in around $100 billion more than expected. In addition, a lack of a rate increase by the Federal Reserve and upwardly revised home price forecasts impacted the increase in expected originations.
Last year’s refinance estimate increased to $0.567 trillion from the previously forecasted $0.538 trillion, while 2015 refinance activity is expected to reach $0.734 trillion, which is $0.067 trillion more than expected in August. Next year’s refinance projection grew to $0.420 trillion from $0.390 trillion.
Freddie has refinance share going from 42 percent in 2014 to 48 percent this year and then falling to 30 percent in 2016.
Purchase financing made up an estimated $0.783 trillion of last year’s activity, more than the $0.713 previously estimated. The 2015 purchase forecast was lifted to $0.796 trillion from $0.783 trillion, and next year’s projection grew to $0.980 trillion from $0.910 trillion.
Mortgages insured by the Federal Housing Administration account for 19.2 percent of the 2014 total, 19.7 percent of the 2015 forecast and 20.0 percent of next year’s expected total production.
Adjustable-rate mortgage share was an estimated 11 percent of last year’s production. ARM share is expected to drop to seven percent this year then jump to 15 percent in 2016.
