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More Than 40% of U.S. Households Not Willing or Able to Purchase a Home

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A new report from iEmergent, a mortgage data analytics firm, claims a huge chunk of the nation can’t buy a home, despite reduced asking prices and ultra-low mortgage rates.

In its 2014 – 2018 U.S. Total Mortgage Volume Forecast released today, the company claimed that more than 40% of all U.S. households are not part of the available “household pool for home purchase financing.”

In plain English, they apparently aren’t qualified, ready, or willing and able to purchase and finance a piece of property.

This is certainly unwelcome news, considering the fact that home purchase lending was supposed to be the industry’s savior in 2014.

Home Buying Demand ‘Penned Up’

We’re often told that there is pent up demand for housing, usually by the National Association of Realtors, but iEmergent refers to the current situation as “penned up,” meaning household balance sheets aren’t good enough to allow for the purchase and subsequent financing of a home.

Issues like unemployment, stagnant or falling incomes, and tight home loan underwriting guidelines mean only the top 15% of households can get in the game.

iEmergent president Dennis Hedlund noted that consumer spending, the lifeblood of the economy, has been “muted since 2007,” and until it gets back on track home buying will remain subdued.

That said, the total available household pool for home purchase financing is near levels seen in the mid- to late-1990s, before the dot-com bubble took center stage.

2014 Purchase Mortgage Volume Projected to Get Mildly Better

Clearly this is bad news for both renters looking to buy and mortgage lenders looking to dole out loans post-refinance boom.

The projected 2014 purchase mortgage dollar volume is $612 billion, per iEmergent, an increase of just 4.72% from the estimated total last year.

And if you look at purchase loan units, as opposed to volume, the increase is only expected to 1.68%.

In other words, there won’t be that many more purchase loans originated this year compared to 2013, but they’ll be for larger loan amounts.

The numbers could also get a boost from desperate banks and lenders grappling with flagging refinance demand.

Refi Volume Expected to Fall More Than 50% This Year

Speaking of refinancing, volume is expected to fall more than 52% this year, with iEmergent providing a range from as low as $394.5 billion to as high as $477 billion.

The good news is mortgage rates have already sunk since the beginning of the year thanks to some economic jitters, meaning refis might get an unexpected boost.

And if anything happens on the HARP 3 front, that too could pump up the numbers a bit.

There’s also a lot of credit loosening taking place, with even relatively conservative big banks like Wells Fargo lowering LTV and credit score requirements to allow more borrowers to take part.

Of course, this is a dangerous game that could lead to another batch of bad loans, but with the Ability-to-Repay and Qualified Mortgage rules in place, things shouldn’t get too out of hand any time soon.

Overall, the company predicts mortgage volume to total anywhere from $1 trillion to nearly $1.1 trillion this year, with roughly 4.42 to 4.78 million loans originated.

That’s about a 30.3% reduction in mortgage units and 28.4% drop in mortgage dollar volume from 2013.

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