The Mortgage Brokers Association’s outlook on the economy has brightened in the past four weeks, extending the life of the refinance boom through March.
The Washington, D.C., trade association’s monthly forecast posted Feb. 19 sharply revised upwards its estimates for refinance originations for the current quarter and the fourth quarter of 2020.
Whereas a month ago the MBA forecast that the refinancing boom peaked in 2020’s third quarter, it now shows the refinancing boom peaking in the current quarter.
In the Feb. 19 forecast:
- Refinance originations for 2020’s fourth quarter was revised up 20% to $724 billion. The revised amount is 90% higher than a year earlier.
- Refinance originations for this year’s first quarter was revised upwards 48% to $740 billion. The revised amount is 142% higher than a year earlier.
- No revisions were made refinance originations before Oct. 1, 2020 or after March 31, 2021, which makes the drop off after March 31 appear sharp.
- Also, no revisions were made to any purchase origination forecasts. It still expects $1.57 trillion in the 12 months ending Dec. 31, up 10.5% from 2020.
- Total originations for the first quarter were revised up by 29% to $1.06 trillion, an amount 88% higher than a year earlier.
- For the fourth quarter, total first-mortgage originations were revised up by 12% to $1.13 trillion, an amount 62% higher than in 2019’s fourth quarter.
Among credit unions, Callahan & Associates’ Feb. 11 Trendwatch report showed first-mortgage originations were $79 billion in the three months ending Dec. 31 — 36% higher than in 2019’s fourth quarter, but falling below the five-quarter peak of $81 billion in the third quarter.
Feeding originations have been economic improvement, rising home prices and 30-year fixed rate mortgages that have remained near historic lows.
The MBA revised the 30-year rate for the first quarter down by 10 basis points to 2.8%, compared with 3.5% in 2020’s first quarter.
By the second quarter, the MBA said it expects the 30-year rate to rise to 3.1%, roughly matching rates a year earlier. After that, it said it expects the rates to rise further, ending the year at 3.4%, compared with 2.8% in 2020’s fourth quarter.
Another big change is the MBA’s expectation of faster economic growth this year. The forecast changes extend through 2022, but the heaviest changes are for this year. The MBA said it now expects Real Gross Domestic Product will rise at a seasonally adjusted annual rate of 4.8% this quarter, up from 2.3% in last month’s estimate. Estimates for the rest of the year were raised by 2 percentage points, with growth peaking at 7.2% in the third quarter.
For the year, it said it expects GDP growth of 5.9% (revised from 3.7%), up from 2.2% growth in 2020.
The MBA added it expects 6.3 million existing homes to be sold this year, up 11.7% from 2020. It said it expects their median price to rise 3.6% to $306,000.
New home sales are expected to rise 16.7% to 949,000 this year, as their median price rises 0.8% to $332,600.