Evidence is mounting that home sales will set a record in 1998, pushing mortgage originations past the $1 trillion mark set at the height of the refinancing boom in 1993.
The National Association of Realtors reported Wednesday that resales of homes reached an annual rate of 4.75 million units in February-almost 350,000 more than most economists expected.
Unseasonably warm weather across the nation may partially explain February's homebuying fever, economists said.
But with incomes and home prices steadily rising and mortgage rates still low, February's resales are no flash in the pan, economists say. They say Americans will buy first homes and trade up in record numbers this year.
David Lereah, chief economist at the Mortgage Bankers Association, predicts that mortgage lenders will make $1.06 trillion of home loans this year. The record, from 1993, is $1.02 trillion.
But unlike 1993, when an estimated 55% of loans were refinancings, most mortgages this year will be for purchases. Mr. Lereah said.
In a refinancing boom, "someone's winning, someone's losing," Mr. Lereah said, because each loan that is refinanced depletes an existing portfolio of loans.
But financing home purchases is "a win-win, particularly if it's a first-time homebuyer," he said. The MBA estimates that 40% of loans this year will be refinancings.
"It's a very unusual environment," said Angelo R. Mozilo of Countrywide Credit Industries, one that "I've never seen in 45 years in this business."
With interest rates and unemployment low and refinancings booming, "it's the hat trick of mortgage finance," said Mr. Mozilo, Countrywide's chief executive officer and vice chairman. Originations could go as high as $1.5 trillion, he said.
Reflecting February's strength, the National Association of Realtors will revise its 1998 resale forecast next month from 4.27 million units to more than 4.3 million, said Frederick E. Flick, its vice president of research. That would make 1998 the third consecutive year of record-setting home resales.
Certainly the MBA's purchase application index, which leads home sales by two to three months, supports that forecast. The high levels of purchase applications suggest that home sales will continue to be high into the summer, said Mark Zandi, chief economist at Regional Financial Associates.
February's resale numbers are the latest sign that the housing market is very hot this year.
The Commerce Department reported this month that the seasonally adjusted annual pace of new home sales in January was 877,000 units, the highest since 1986.
The government also estimates that February housing starts were up 6% from the month before to an annual rate of 1.636 million.
Economists aren't sure how much of this activity reflects El Nino- related mild weather across the nation, rather than a growth trend in the economy.
Therefore, they say, at least some housing starts and home sales that show up in January and February numbers may be borrowed from the traditional spring homebuying and building season.
Unusually mild weather may also cause seasonally adjusted data to overstate the actual level of economic activity.
"My guess is the weather has played some role in this number," said Mr. Flick. But, he added, "I don't have any good handle on what percentage that is."
