Mortgage origination volume for 2011 could be as low as $825 billion as demand disappears, according to the latest projections from iEmergent, Des Moines, Iowa. The company now predicts a range of between $825 billion and $942 billion; back in November, it projected 2011 volume of between $904 billion and $991 billion.
Purchase volume for this year is projected to be $477 billion, a slight cut from the November forecast of $491 billion.
But where iEmergent made its big cut in the forecast was in its range of refi volume, to between $385 billion and $466 billion from between $413 billion and $500 billion.
The company believes 41% of all American households are no longer in this year’s pool of potential homebuyers or refinancers. It notes refi demand has popped up for brief periods of time, but this demand will decline as the pool of eligible homeowners shrinks.
“The home finance industry is pinning too much hope on short-term, supply-side headlines that trumpet the wishful thinking of low rates, low prices, high affordability and lots of available inventory. But households are trapped. Middle-class homeowners won’t buy because they can’t sell without big losses. They can’t refinance because they can’t qualify. Add millions of the unemployed who have limited prospects of finding a job in the near term, unless it’s part-time or pays less than what they were used to, and you have a formula that bodes poorly for home lending in the next two to three years. A quick turnaround in this environment requires a rapid rebound of demand, not supply,” said Dennis Hedlund, president of iEmergent.
“Jobs—better jobs—not austerity are what’s needed to change the situation. Without jobs, the next six months of home financing don’t look very encouraging. For all lenders, this zero-sum competitive environment will get tougher before it gets better.”
