From the Originator Times:
Loan Volume Decline Equals More Pink Slips
The Bureau of Labor Statistics reported Friday; employment in the mortgage finance industry fell to 494,700, which is lower than one month and one year earlier. Based on a report also released on Friday, the Mortgage Bankers Association (MBA) projected the number of mortgage originations this year will fall once again. Based on this trend it is likely that a record number of originators will be forced out of the mortgage origination field in 2007.
According to the MBA’s report mortgage volume will continue to decline throughout 2008. “Total originations in 2007 are projected to decline by about 5 percent to $2.39 trillion from an estimated $2.51 trillion in 2006. They should decline by an additional 4 percent to $2.29 trillion in 2008,” the report said.
The report also indicated that refinance volume should be hit the hardest; “the end of 2006 pickup in refinance activity reflects borrowers paying off ARM loans that either had already or were about to reset to higher payments,” and therefore is unlikely to continue throughout 2007.
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As with home sales volumes, the volume of purchase mortgage applications declined in 2006. This is well below volumes seen in 2004 and 2005.30-year fixed mortgage rates peaked in June of 2006 above 6.8 percent, then fell sharply after the Fed paused at their June meeting. At one point in the fall of 2006, the 30-year rate dropped below 6 percent.
Interest only (IO) loans, with both adjustable- and fixed-rates, and payment option loans that allow negative amortization, have become a very important part of the market. In the second half of 2005 and the first half of 2006, IOs accounted for about 25 percent of the dollar volume of originations.
The share of the market accounted for by the government lending programs, FHA and VA, has decreased considerably in recent years. Gaining market share have been the prime and subprime segments.
Much of the stock of outstanding loans has been originated in the past three years. This has implications for mortgage delinquencies and foreclosures, as loans tend to hit their peak delinquency rates three to five years after origination. We estimate that more than 80 percent of outstanding loans have been originated since 2002.
The ARM share of outstanding mortgages has grown from about 18 percent in 2003 to about 25 percent as of the third quarter of 2006.
Most Agree: Housing Agree: Housing Crunch Isn’t Over Yet
Only 9% of economists say the housing decline ended in 2006, according to a USA TODAY survey of 55 economists taken Jan. 18-24. Another 42% said the downturn will end in the first half of the year, and 45% said housing will bottom out in the second half.
http://www.usatoday.com/money/economy/housing/2007-02-04-housing-econ-usat_x.htm
Thanks for sharing the article.
I found this part interesting… as I feel the same way also.
The NAR’s index of pending home sales, which is adjusted for seasonal variations, rose in December at the fastest pace since March 2004. The level of unsold homes on the market appeared to have peaked in July, the group says.
But Wachovia senior economist Mark Vitner says although recent housing data have been upbeat, they have been skewed by warmer-than-usual weather.
“That brought out a few more buyers and allowed for more building in the Northeast,” he says. Vitner says the warm weather “pulled sales forward.” Come spring, housing activity will be slower than normal, he says.