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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: biometricgngboy who wrote (12808)	8/21/2003 9:14:50 AM
From: biometricgngboy	Read Replies (1) \| Respond to of 306849

Mortgage business dropping INDUSTRY ASSOCIATION REDUCES ITS FORECAST bayarea.com article: By Sue McAllister Mercury News "A sudden drop-off in mortgage refinancing led a mortgage-banking trade group Monday to lower its earlier predictions of the mortgage market's strength this year and next. The Mortgage Bankers Association of America now estimates that a total of $3.2 trillion worth of both purchase and refinanced mortgages will be originated this year, down from a previous forecast of $3.4 trillion. In 2004, the revised forecast calls for $1.5 trillion in mortgages, falling from an earlier estimate of $1.9 trillion. The changes are based entirely on the precipitous decline of mortgage refinancing, the group said. ``We have been forecasting mortgage interest rates to slowly increase, eventually drying up the refinance market, but the recent upsurge in rates has moved that event forward,'' said Doug Duncan, chief economist for the bankers group. In a weekly report on new mortgage applications, the bankers group said last week that refinance applications had dropped by two-thirds since the peak of refinancing activity in late May and early June. Average mortgage interest rates have risen more than a full percentage point since mid-June, when they reached a 45-year low of about 5.2 percent. The national average for a 30-year, fixed-rate mortgage Monday was 6.51 percent, according to financial publisher HSH Associates, which tracks rates daily. Duncan said the primary reason rates have risen so steeply is that investors expecting rapid economic growth in the third quarter sold bonds in large quantities, sending their prices down and yields up. Mortgage rates, as they typically do, mirrored the direction of the 10-year Treasury bond. ``We expect, however, that rates will be back down from recent highs because current levels are not in line with economic fundamentals,'' Duncan said. But he forecasts that rates will move up slowly throughout next year. The Mortgage Bankers Association did not alter its forecast for mortgages made for the purpose of buying homes in 2003 and 2004. Duncan estimated $1.08 trillion in purchase mortgages will be originated this year, and $1.11 trillion in 2004. Although rising rates may drive some prospective home buyers out of the housing market, Duncan said an improving economy will lead others into it. Home sales are much less sensitive to interest-rate changes than refinances, he said. In addition, buyers can make a home more affordable by choosing an adjustable-rate loan with a lower interest rate over a fixed-rate loan. More buyers already are doing so, Duncan said -- about 22 percent of mortgage applications last week were for adjustable-rate loans, up from about 10 percent at the low point."