The Mortgage Bankers Association (MBA) increased its mortgage origination forecast for 2012 by almost $200 billion, due entirely to an increase in refinances. However, MBA is slightly lowering its purchase originations forecast for 2012 from $415 billion to $409 billion.
MBA now expects that mortgage originations will reach $1.28 trillion in 2012, up from $1.26 trillion in 2011. Refinance originations are now expected to total $870 billion in 2012, an almost identical amount to 2011.
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This month's refinance estimate for 2012 reflects an upward revision of $188 billion from MBA's April forecast, driven by an increase in the pace of refinance applications and originations, while purchase origination estimates were revised downwards by $6 billion to reflect lower than previously expected home prices and weaker than previously expected home sales.
"Scenarios we have consistently highlighted that could drive rates down and refis up have materialized, primarily due to market turmoil in Europe," said Mike Fratantoni, MBA's vice president of Research. "Deterioration of the debt situation in Spain and Greece and a new regime in France that is a weaker proponent of European austerity, along with slower economic growth globally, have driven the U.S. 10-Year Treasury yield down. Thus, we are projecting lower U.S. mortgage rates for the rest of the year and raising our refinance forecast as a result."
However, the outlook for purchases is dimming as gradual positive trends in consumer attitudes observed since early fall 2011 appear to be reaching a plateau, according to results from Fannie Mae's May 2012 National Housing Survey.
"Our May consumer data show that Americans are taking a 'wait and see' approach about buying or selling a home. This is not surprising given their assessment that their income during the past twelve months and their personal financial expectation for the next twelve have leveled off. These data are in line with what we are seeing on the macroeconomic front, as upside and downside risks and activities are moderating one another," said Doug Duncan, vice president and chief economist of Fannie Mae. "Current jobs data are reminiscent of the spring slowdown that continued into the summer months during the last two years. If this pattern continues, we do not expect to see any significant upturn in consumer sentiment during the summer and a meaningful housing recovery likely will be delayed once again."
The leveling of consumer attitudes can be seen in Americans' inclination to buy (versus rent) their next home despite some mildly positive trends. Forty-one% of National Housing Survey respondents expect home mortgage rates to go up in the next twelve months (a slight increase from last month). At the same time, on average, Americans expect home prices to increase 1.4% over the next twelve months (up from 0.9% in March 2012 and the highest value yet recorded.) Both indicators suggest the potential that consumers may consider moving off the sidelines to purchase a home. Nevertheless, the percentage of respondents who would buy is down to 63% in May from 64 in April and 66% in March.
Separately, MBA reported that the commercial and multifamily mortgage delinquency rates dropped for banks and rose for commercial mortgage backed securities (CMBS) during the first quarter of 2012. Delinquency rates also declined for life insurance companies and Fannie Mae during the first quarter, and increased by 0.01 percentage points for Freddie Mac.
* Life company portfolios: 0.14% (60 or more days delinquent);
* Freddie Mac: 0.23% (60 or more days delinquent);
* Fannie Mae: 0.37% (60 or more days delinquent);
* Banks and thrifts: 3.44% (90 or more days delinquent or in non-accrual);
* CMBS: 8.85% (30 or more days delinquent or in REO).
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