Mortgage Purchase Volume Expected to Outpace Refinance Activity in 2011

November 10, 2010 No Comments »

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Home purchase loan origination volume is expected to outpace refinance volume in 2011, according to a forecast released today by iEmergent.

Next year, 2.62 million home purchase mortgages for $490.9 billion and 2.18 million refinance loans for $412.9 billion (low estimate) are expected.

The projected $903.8 billion represents a 17 percent decrease in total origination volume from end-of-year 2010 volume estimates.

That includes a 29 percent drop in refinance activity and a 0.5 percent drop in in purchase volume.

“The home financing industry is now caught in a serious ‘demand trap,’ a negative feedback loop of economic and behavioral deflation,” said Dennis Hedlund, President of iEmergent, in the release.

“Similar to the liquidity trap that spawned it, mortgage rates have reached unprecedented low levels, yet purchase money mortgage demand languishes as prime home buyers are trapped by cumulative downward economic and job pressures.”

As a result of the ongoing mortgage crisis, the total available homebuyer pool has been reduced to levels not seen since 1995.

He noted that refinance demand may “pop for brief periods,” but said heavy volume is unsustainable and will diminish over time as eligible households dry up.

Per the report, the forecast will put mortgage lenders of all sizes at risk, especially those that have relied on refinance volume to stay afloat.

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