Academic journal article ABA Banking Journal
Mortgage Originations: It's a Local Story
One of the hot topics in the press right now is the real estate market and mortgage origination volumes. Will mortgage originations fall off; will asset quality worsen; which markets will be problematic; and how can we tell? These are all tough questions that do not have easy answers, but there is a way to get a sense for what the future holds: look at the recent history of mortgage originations.
The chart below, using quarterly survey data from the Mortgage Bankers Association, shows that purchase originations, as measured by dollar volume, grew steadily from 2001 through the end of 2005. The steady growth trend extends itself well back into the early 1990's, so it is reasonable to expect that the mean behavior will extend into the future.
The chart also shows that refinancing activity peaked in the third quarter of 2003 and was relatively steady through the end of 2005. Mid-2003 was marked by some of the lowest interest rates ever seen by the mortgage market, so the refinance trend is understandable. Compared to the bulk of the 1990's, refinance activity is still at a relatively high level, but in line with projected, average behavior.
More recently, mid-2005 showed an uptick in both purchase and refinance originations that anecdotally may have been the last gasp of the real estate boom.
A return to the mean behavior scenario suggests that on the national level originations may fall off in the short term, but long term they will remain solid. On the local level, however, the story may be different. Home Mortgage Disclosure Act (HMDA) data provide an insightful view into the regional trends.
For example, the data show that in the Jacksonville, Fla., area originations for nonoccupant mortgages in 2005 was 15.93% on a number basis, or 16.56% on a dollar volume basis, up from 9.55% and 9.05% in 2003, respectively. …