Housing is in the middle of a “lost decade,” said a market research firm, with loan volume under $1 trillion for 2011 and slow growth expected between 2012 and 2015.
Des Moines, Iowa-based iEmergent projects origination volume between $904 billion and $991 billion next year, below the $996 billion economists at the Mortgage Bankers Association predicted for 2011.
According to iEmergent, purchase volume will be $491 billion in 2011 and refinancings will be between $412 billion and $500 billion. iEmergent expects a 29% drop in refis, but only a slight drop in purchase loans. Next year, it said, is the fifth of the “lost decade.”
MBA on the other hand, projects purchase loan volume increasing from $480 billion for this year to $626 billion next year, and refis falling from $921 billion to $370 billion.
Nearly four in 10 households, iEmergent said, will no longer be part of the pool of potential homebuyers or refinancers next year, because of the economic collapse of the past few years. This brings the pool down to levels similar to those in 1995, which the firm says is a key factor in its 2011 forecast.
iEmergent President Dennis Hedlund said the industry is in a “demand trap”—a negative loop of economic and behavioral deflation.
Rates have reached new lows, but purchase mortgage demand lags as buyers are “trapped by cumulative economic and job pressures,” he said.
There needs to be growth in demand tied to real growth in jobs and the re-employment of millions of people. Otherwise, the “demand trap will be very difficult to escape. Refinance demand may pop up for brief periods, but elevated volumes will be unsustainable and will diminish over time as the remaining household pools shrink faster than they can be replenished. Demand can’t be created from households that can’t buy,” Hedlund declared.
In the coming years, Hedlund said, lenders could end up in a “self-induced, long-lasting and potentially debilitating 'performance trap,’ a cycle of stagnation that loses customers, thwarts recovery and leads to chronic underperformance.”
