The Mortgage Bankers Association (MBA) has significantly revised its forecast for purchase volume for 2015-2016. Currently, the association is predicting that purchase originations will reach $801 billion this year and $885 billion next year.
That's an increase of $71 billion and $94 billion, respectively, over the association's previous forecast.
As far as refinances are concerned, the MBA is keeping its forecast basically the same: The association predicts that refinances will reach $551 billion this year, compared to $484 billion in 2014.
As a result, total originations are expected to reach $1.35 trillion this year and $1.26 trillion in 2016, compared to $1.12 trillion in 2014, the MBA reports.
The MBA says the recent pickup in existing-home sales, stronger-than-expected job growth and improvements in the overall economy are factors that prompted it to revise its forecast for purchase volume.
In a statement, Mike Fratantoni, chief economist for the MBA, along with Lynn Fisher and Joel Kan, senior economists, predict the increase in purchase volume will materialize despite the fact that inflation is on the rise and the Federal Reserve is expected to raise short-term interest rates later this year.
‘We expect that mortgage rates will hit 4.5 percent by the end of the year,’ the trio says in a joint statement. ‘However, the positive of the stronger job market will outweigh any negative of somewhat higher mortgage rates.’
Rising home prices remain a major concern because it impacts affordability, especially for first-time home buyers. The National Association of Realtors (NAR) reports that the median existing-home price for all housing types in June was $236,400, an increase of 6.5% compared to June 2014. In fact, the average home price in June surpassed the peak median sales price of $230,400 set in July 2006, the firm reports.
Increased inventory should result in increased sales: Recent data from NAR and RealtyTrac show that inventory levels are improving, which, in turn, should help hold down home prices. Helping to boost inventory is the fact that all-cash sales by investors have fallen to new lows.
‘Overall, we believe that pull-through rates have increased, reflecting incremental but important changes in borrower behavior and lender underwriting practices, as well as changing average loan sizes and falling cash shares,’ the MBA officials say in the release. ‘More sales are being financed, and more applications are being approved. And we expect that this trend will continue into 2016 and beyond, as the broader economy and job market continue to improve.’