The Mortgage Bankers Association on Tuesday jacked up its 2009 forecast for mortgage originations to reflect the Fed's recent moves to engineer lower mortgage rates. The group now expects mortgage originations to total $2.78 trillion this year--an increase of more than $800 billion from its previous estimate.
[Check out: Mortgage Rates to Fall Further: 7 Things to Know]
But with the labor market continuing to erode, the group expects the bulk of the total to come from refinancing, rather than home buying:
MBA estimates that refinancings in 2008 totaled $765 billion and were forecast to increase to $1.13 trillion in 2009. With the recent moves by the Federal Reserve and the Fannie/Freddie program, refinancings are expected to reach $1.96 trillion. In contrast, MBA estimates that purchase mortgage originations in 2008 totaled $854 billion, and were forecast to fall slightly to $851 billion in 2009. The new MBA estimate for 2009 is $821 billion, driven by a combination of continued declines in home sales and lower prices on the homes that are sold, leading to smaller mortgages on average than in recent years.
"Even with amazingly low interest rates, lower home prices and the first-time homebuyers tax credit, it is unlikely that we will see an increase in overall home sales until we see some stabilization of employment," [MBA Chief Economist and Senior Vice President of Research and Economics Jay] Brinkmann said.