The mortgage market will be much weaker this year than anyone expected, possibly by $100 billion, according to an analysis by two experts on mortgage data and housing prices.

Their projections call for a decline of 34% in mortgage originations in key areas of the nation and suggest an overall decline of about the same size.

The experts are Nima Nattagh, a market analyst with TRW Redi Property Data, Anaheim, Calif., and Douglas Bendt, president of Mortgage Risk Assessment Corp., Hoboken, N.J.

Their projections work out to about $500 billion in originations for the year. Fannie Mae has been expecting a decline of about 18%, to about $613 billion, from an actual figure in 1994 of $752 billion as compiled by the Department of Housing and Urban Development.

Industry observers reacted with surprise and a measure of skepticism to the projections. Larry Swedroe, vice chairman of Residential Services Corporation of America, said, "It sounds too dramatic to me. I find it hard to believe we will be down that much."

Mr. Swedroe said he believed that, after a slow first quarter, mortgage banking companies were running about 50% ahead of their figures a year earlier, but that banks and thrifts could be losing ground. He said that, on balance, a drop of as much as 20% for the year would be credible. He said his own company, a unit of Prudential Home Mortgage Corp., Clayton, Mo., was doing a booming business.

David Lereah, chief economist for the Mortgage Bankers Association, said he was inclined to think the HUD figures for actual originations were on target. "They put originations at $1.03 trillion for 1993. Then the Home Mortgage Disclosure Act data showed originations of $997 billion, and some lenders were not included. There's a comfort level with this data; it comes pretty close," he said.

The TRW data cover 100% of the mortgages recorded in major metropolitan areas in 22 states. The areas account for half of the nation's population.

Mr. Nattagh said that though one could debate the actual numbers for a given year, the TRW figures accurately depict the magnitude of the year-to- year decline. He said the HUD figures could be high or low in any given year because of sampling errors, while his numbers used a consistent universe from year to year.

The projections for the full year were done by adjusting for expected changes in house prices, in which Mortgage Risk Assessment has special expertise.

"Our 1995 projection for nonpurchase originations takes into account the retarding impact of declining home prices on homeowners' ability to refinance or add second mortgages to their existing debt," the report said.

In describing the backdrop to their findings, the two analysts wrote, "Increases in purchase origination volumes, coupled with declining interest rates throughout 1994, led many observers to declare that the housing market was on a sustainable path of recovery - a trend that would continue throughout 1995," the two analysts wrote.

"This was particularly welcome news for the mortgage lending industry since growth in purchase origination volumes would have gone some way to compensate for the collapse of refinance activity."

They added that projections of originations of loans to buy homes ranged from flat to an increase of 3%. But their figures were indicating a decline of 14%.

"What is of particular concern is that lending activity is projected to decline in those states that have experienced buoyant housing markets over the course of the last three years and which have bucked the recessionary trend seen in California and the Northeast," the report said.

The report did include a measure of optimism. "There are indications that home prices have begun to stabilize in some parts of the country and, assuming that this pattern holds in the near term, there will be an expanded market for equity mortgage products in 1996," the report said.

It added that stable home prices in part of the country should alleviate fears of declining credit quality.

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