Home lending in the U.S. will probably decline 25 percent to $900 billion next year, according to an estimate from the Mortgage Bankers Association.
Lower refinancing activity will drive the drop, while loans for home purchases will be little changed at about $400 billion as property sales remain subdued, the trade group said today in a statement released at its annual conference in Chicago.
The association has predicted declines in refinancing activity for three years because of its forecasts of rising interest rates, Jay Brinkmann, its chief economist, told reporters in a presentation. The average rate on a typical 30-year mortgage instead fell to a record low 3.94 percent last week, according to housing-finance firm Freddie Mac, reflecting lower bond yields amid concern Europe’s sovereign crisis will spread and the Federal Reserve’s latest debt-buying plan.
“One of these years, I guess we’ll get it right,” Brinkmann said. “It’s really difficult to forecast interest rates in this environment” because of the Fed’s involvement in the debt market, which has been intended to spur growth and support housing.
At its annual conference a year ago, the Washington-based Mortgage Bankers Association predicted $996 billion of home-loan originations this year, which would have been the lowest amount since 1996. It now forecasts $1.2 trillion for 2011. Lending totaled $1.6 trillion last year, after peaking at about $4 trillion in 2003, according to the group’s data.