What's ahead for the housing market this spring?
The refinance boom of recent years
is on the wane. In the first quarter of 2013 refinances made up 71% of mortgage origination activity and have been declining since – down to 51% in the fourth quarter of 2013.
By comparison, mortgage originations for home purchases were up more than 20% last year. Looking forward, our Chief Economist Frank Nothaft anticipates that more than 50% of the mortgage market will be originations for home purchases by the end of 2014. A purchase dominated market hasn't happened in 14 years – not since 2000.
As we move to a purchase market, how does the overall housing market stack up? Housing is stronger today than at any point since the Great Recession began and hit bottom in 2009.
Against this back drop, mortgage rates are rising but remain near historic low levels, keeping housing affordable in most parts of the country. Expect mortgage rates to continue rising gradually – about a half-percentage point during the year – to around 5% by year-end.
If improvements in job growth and income continue as Chief Economist Nothaft discusses in his March Economic & Housing Market Outlook – all these factors will help support the emerging purchase market.
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