According to the Mortgage Bankers Association’s Economic and Mortgage Finance commentary for May 2015 written by Joel Kan, associate VP, industry survey and forecasts at MBA, economic growth struggled its way through the first quarter.
Kan believes that Q1 was mostly impacted by the stronger U.S. dollar and lower exports, as well as trade and inventory disruptions on the West Coast. On the other hand, low retail sales signified that consumers were not spending much in Q1, and a decline in industrial production could be a sign that businesses are not motivated to increase production and invest.
“We still believe that some of these are temporary factors and that domestic growth will pick up in the second quarter, given that the job market remains strong and there has been upward pressure on wage growth,” Kan said. “Because rates have been low for most of 2015 until recently, we revised our refinance originations estimate upward for both the first and second quarters due to higher than expected MBS issuance data and strong refinance applications in the months of February, March, and April.”
In his commentary, Kan mentions that refinances are expected to be $551 billion in 2015, compared to a previously estimated $510 billion. MBA now estimates a total of $1.28 trillion in mortgage originations for 2015, compared to $1.12 trillion in 2014. Purchase originations are expected to increase to $730 billion in 2015 from $638 billion in 2014.
“The BEA’s advance estimate of first quarter growth was a paltry 0.2 percent, the slowest quarter of growth since the first quarter of 2014,” Kan said. “We and others are becoming increasingly skeptical that the government’s seasonal adjustment process is fully capturing typical first quarter weakness. This is another reason we are less worried by slower reported growth in Q1.”
Although interest rates have been low mostly placing concern on economic growth, the MBA expects rates to increase through the course of the 2015 and the Fed will raise rates in September as the economy and job market grow stronger.