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Releases Long-Term Forecast for U.S. Economy and Housing Finance Market The
Mortgage Bankers Association (MBA) released its long-term economic forecast for
2004, 2005 and 2006 during its annual State of the Real Estate Finance Industry
press briefing. MBA is projecting strong economic growth through 2006, with gross
domestic product (GDP) growth rates exceeding 4 percent each year.
"The year 2004 looks to be an exceptionally strong year, building on the gains
of the last part of 2003, with the result of continued strength in employment
and the housing market. We see the job market getting even stronger, even with
- and in some cases due to - the record gains in productivity, resulting in a
positive impact on home purchases and mortgage originations," said Doug Duncan,
MBA chief economist and senior vice president, research and business development.
"Despite this level of economic growth, we see interest rates increasing
only moderately due to continued expectations of low inflation. Long-term rates
should increase from current levels by 40 to 50 basis points by the end of 2004,
and another 70 to 80 basis points during 2005. Coming off our recent lows, these
are very modest interest rate increases for the level of economic growth we are
expecting," Duncan said.
The key points of the latest MBA forecast are
the following: -
Real GDP growth will average 4.7 percent during
2004, and 4.1 percent in 2005 and 2006. -
The unemployment rate will
decline from the current level of about 5.7 percent to 5.2 percent by the middle
of 2006. -
The 10-year Treasury rate will rise to an average of 4.5
percent by the fourth quarter of 2004, 5.3 percent during the fourth quarter of
2005, and average 5.4 percent during 2006. -
Mortgage rates will
follow a similar pattern, although the spread between mortgage and Treasury rates
is expected to tighten. -
Existing home sales will come off record levels
and fall by 5.1 percent in 2004 and fall by 3.6 percent in 2005 and be essentially
unchanged in 2006. Sales will remain at very high levels by historical standards.
New-home sales will fall by 7.2 percent in 2004 and fall by 3.3 percent in 2005,
but remain unchanged in 2006. In addition, home-price growth is expected to be
modest, with existing-home prices increasing 5.5 percent during 2004 and new home
prices increasing 3.7 percent. Price increases in 2005 and 2006 are expected to
be in the 4 percent range. -
Mortgage originations will be down from
a record high in 2003, but will hit $1.99 trillion in 2004, $1.72 trillion in
2005 and $1.78 trillion in 2006. While the refinancing volumes will be far below
the levels of 2002 and 2003, mortgage originations for purchasing homes are expected
to be $1.31 trillion in 2004, $1.35 trillion in 2005 and $1.42 trillion in 2006,
versus $1.27 trillion in 2003.
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