Looking ahead

guest commentary by Ethan Nobles writing on behalf of the Mortgage Bankers Association of Arkansas. He can be reached at [email protected]

The national Mortgage Bankers Association is expecting an increase in purchase loans in 2012, but not a large one.

The Association, on Aug. 19, increased its origination forecast for 2011, but dropped it for next year. Still, the trade group expects to see an increase in purchase mortgages next year after a decidedly stormy 2011.

The good news from the latest forecast has to do with total residential mortgage originations. The Association projects a total of $1.1 trillion in residential mortgage originations this year, up $100 billion from earlier forecasts. That boost, a news release states, comes in the form of an increase in refinance mortgages driven by interest rates that are still at historic lows.

Purchase mortgages, on the other hand, have languished in 2011. The Association predicted purchase mortgages totaling $615 billion in 2011, but now expects $412 billion by the end of the year. The group chalks up the decline in purchase originations to unemployment, volatility in financial markets, low consumer confidence – pretty much the same issues that have plagued the national economy since 2007.

Further, the association expects total mortgage originations to drop to $931 billion in 2012.

Is there any good news in the latest report from the Association? Actually, there are some encouraging items buried in there. First of all, the Association does expect a moderate increase in purchase originations – around $512 billion in 2012 compared to an anticipated $412 billion this year. Should that projection hold, we’ll see an increase from the $473 billion in purchase originations recorded in 2010.

That’s a modest increase, to be sure, but it is at least a step in the right direction.

On the other side of the coin, of course, the Association is calling for a drop in refinance applications compared to 2011 – $400 billion next year compared to a projected $697 billion this year.

Another encouraging note from the Association has to do with unemployment numbers. The group expects to see the national unemployment rate remain above 9% this year, but drop below that level by the end of 2012.

The point of tossing all these numbers around and paying attention to projections is this – economic improvement will come slowly, but at least there are signs of better times on the horizon.

Historically, the Mortgage Bankers Association has managed to avoid hyperbole when making forecasts, preferring to temper projections with realism rather than idealism and marketing. That group is quick to point out that the economy is recovering slowly, but there are some signs that things will get better in the long run.

If an historically conservative group like the MBA is calling for a slight improvement in purchase originations next year, that’s a projection worth following. The decreased unemployment projection is particularly noteworthy – people who aren’t working or are worried about losing their jobs don’t run out and buy houses or make other major purchases.

Will the Association’s projections prove correct? Will the economy show signs of improvement in 2012? We’ll just have to wait and see.