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Mortgage Originations Set to Soar in Q310-12-16 | News

Mortgage Originations Set to Soar in Q3
Freddie Mac Forecasts 11 Percent Rise

Freddie Mac is predicting mortgage originations will surge in the third quester, primarily because of low interest rates.

Mortgage originations are set to "surge" in the third quarter of 2016, Freddie Mac said, mainly because of historically low interest rates.

Home sales in July 2016 were off the 2015 pace, but pending home sales and home purchase mortgage applications are up. In fact, according to the National Association of Realtors, pending home sales are at their second highest level in over a decade, and purchase mortgage applications are up 11 percent from last year.

"Even if home purchase originations are flat year-over-year, total originations will rise due to strong refinancing activity," Freddie Mac said.

Freddie Mac's forecast is for a $60 billion, or 11 percent, increase in third quarter originations, compared to the second quarter, and for total originations to reach $2 trillion in 2016.

"With rates rising modestly over the next few quarters refinance activity will likely decline," Freddie Mac said. "Purchase originations will rise, but not enough to offset the decline in refinance activity."

Home Demand Gaining Traction Going Into Autumn
Demand for homes is picking up heading into the fall season, according to Redfin, but a nagging problem of a lack of supply continues to hamper prospective buying opportunities.

Redfin's Housing Demand Index, based on the number of people who request home tours and write offers, expanded by 1.7 percent from July to August to a reading of 93. The index's benchmark level is 100.

"But it's worth noting that 100 represents the average demand level over three very intense years for homebuyer demand from 2013-2015," said Nela Richardson, Redfin chief economist. The rise in the August was caused by a surge in the number of Redfin customers who made offers on home. This component was up 9.8 percent from July to August.

However, the number of people who asked for home tours fell by 3.6 percent, and that kept the Housing Demand Index from moving higher than it did.

"Now we're seeing the market catch a new breath after pausing briefly this summer," Richardson said. "Buyer demand strengthened for the second month in a row, signaling that the market has some wind in its sails going into the fall. At the same time, the 2016 home buying season has been less ferocious than it was the past three years."

Redfin continues to hear the same message from its agents.

"There is still a very large pool of people in the market to buy a home right now, but there simply aren't enough homes for them to take action on," Richardson said.

Year-over-year, the Housing Demand Index has fallen 9.4 percent, the 15th straight month of annual declines. And while the number of Redfin customers requesting tours is up 5.3 percent, it is the lowest level of tour growth in two years. And the number of Redfin customers who made offers fell 6.7 percent in August, the 12th consecutive month of year-over-year drops.