There is a study from the Mortgage Bankers Association showing that the outlook for the mortgage market in 2009 is going to be weaker than it previously expected. Not by a bit, either. The MBA took the 2009 outlook down to $2.09 trillion in mortgage originations for all of 2009.
This number may sound rather large, but it is not. This represents a drop of more than $700 billion from an outlook offered in March. In March, it thought there would be a gain of $800 billion.
What is an obvious skewing of the figures here is the rise in interest rates were have seen. Simultaneously, we have seen a drop in immediate demand and home prices keep falling. A half-million mortgages yields lower total dollars if the average home sales price keeps falling.
We have also had a foreclosure resumption following a moritorium. The Fannie/Freddie Home Affordable Refinance Program appears as though it was being too optimistic in March. Rates have risen, and demand has not stayed consistently strong. We have also heard about drop-offs in refinancing applications, but that is typical after a near 100 basis-point rise in rates.
This may be a shock on the surface, but by now it is becoming the norm.
Jon C. Ogg
June 22, 2009
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