Freddie Mac Economist Sees Refinancing Near 60% Again This Year
Freddie Mac chief economist Frank Nothaft predicts a slight growth in the mortgage market for 2003, with originations of $2.54 trillion. This is slightly ahead of Freddie Mac's call for the origination market of $2.51 trillion for 2002.
Refinancings will be between 55% and 60% of originations this year, Freddie Mac said, with adjustable-rate mortgages making up 13% of the market for the year. The most recent projections from the Mortgage Bankers Association of America indicate 60% refinancings for 2003, with 16% of all originations being ARMs.
Freddie Mac's volume projections are midway between those from US Bancorp Piper Jaffray ($2.25 trillion) and Fannie Mae ($3.2 trillion), but close to MBA's $2.6 trillion.
The weaker labor market, he said, increases the likelihood of the Federal Reserve Board further easing interest rates. The Fed is waiting to see the final outcome of the Iraq conflict and the progress of the tax-cut bill in Congress before acting. "One thing is fairly certain: the Fed will not be pushing rates back up anytime soon."
Freddie Mac believes 30-year fixed rates will average 5.7% through the third quarter before gently rising.
Sales of new and existing homes should total around 6.86 million units for the year.
Home price growth will continue to moderate, with the change in values between the fourth quarter 2001 and fourth quarter 2002 at 6.6%. Slower growth will take place this year, averaging between 4.5% and 5.5%.
The spread between the 10-year Treasury and the 30-year, fixed-rate mortgage, Mr. Nothaft predicted, should remain nearly constant at 2% through out 2003.
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