ATLANTA, GA -- The Mortgage Bankers Association (MBA) said this week that it expects new home sales for 2010 to be down by about 13 percent relative to 2009. The group believes that new home sales bottomed in the third quarter of this year and will begin a slow recovery in 2011, increasing around 20 percent from a low base, and then increasing 40 percent in 2012 as markets recover.
Other highlights of the MBA forecast:
• Fixed mortgage rates are expected to average about 4.4 percent in the fourth quarter of 2010, increase to 5.1 percent by the end of 2011, and head towards 5.7 percent in 2012.
• Real GDP growth will be 2.2 percent in 2010, although most of that was seen in the first quarter and growth is estimated to have slowed to around 1.5 percent in the third quarter and 1.9 percent in the fourth quarter. Growth is expected to be about 2.1 percent in 2011 and 3.0 percent in 2012.
• The unemployment rate will increase from the current level of 9.6 percent to 9.9 percent by the first quarter of 2011, end 2011 at 9.5 percent, then fall to 8.7 percent by the end of 2012. Mortgage delinquency and foreclosure rates should track this downward trend in the unemployment rate.
• Total existing home sales for 2010 will be around 8 percent lower than in 2009, despite a boost to sales in the first half from the homebuyer tax credit program. Existing home sales are projected to increase modestly in 2011, increasing by a little less than 2 percent, before increasing by about 16 percent in 2012.
• Purchase originations for 2010 will be $480 billion, about 28 percent below the 2009 level of $665 billion. Purchase originations should rise about 30 percent in 2011, as existing home sales recover and home prices stabilize, and should rise again in 2012 to $877 billion.
• Refinance originations will end 2010 at $921 billion, a decrease of 31 percent from $1.3 trillion in 2009. Refinance activity will decrease by 60 percent in 2011 to about $370 billion as mortgage rates increase and the pool of eligible borrowers shrinks, and fall further to $310 billion in 2012 We expect that the refinance share of originations should fall from 66 percent in 2010 to 37 percent in 2011, and then 26 percent in 2012.