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A Hot Quarter!

DEC 3, 2012 11:32am ET

We’re reporting this week that the originations volume for the third quarter came to $486 billion, a hot quarter indeed.

That translates to a run rate of nearly $2 trillion a year—which is exactly the “new normal” I’ve said that could sustain a healthy mortgage industry. So this is good news.

Obviously, the boom markets approaching $4 trillion we saw a decade ago were unsustainable. But the subsequent lean years in the $1.2 trillion to $1.4 trillion range haven’t been enough to sustain a healthy business.

Will that run rate continue in this quarter and next year? It could, under certain circumstances. Rates need to remain super low, and the Fed has promised to do that for next year and 2014. The purchase mortgage market needs to perk up, and that’s uncertain. The nonconforming market needs to perk up, and that’s uncertain.

But the drop in home values seems to have leveled off in many markets (though not all) and the foreclosure glut appears to have crested, though many remain and many “shadow inventory” foreclosures have yet to be put on the market.

The new home market was the worst hurt in the mortgage calamity. A recovery in the builder market would bolster not just mortgages but the national economy, with its magnifier effect of creating construction jobs and business for home retailers.

A $2 trillion year next year would be a great canary in the mineshaft, but auguring good news rather than bad.