Mortgage originations will average nearly $3 trillion per year over the next decade and residential mortgage debt will grow at close to an 8.25 percent annualized rate.
Those were two of the projections presented today in a 10-year forecast from the National Association of Realtors, Independent Community Bankers of America, National Association of Home Builders, Fannie Mae and Freddie Mac. Economists from those groups, which are part of the Homeownership Alliance, summed up their in a report, “America’s Home Forecast: The Next Decade for Housing and Mortgage Finance.”
Freddie Mac Chief Economist Frank Nothaft said America’s families will need 125 million mortgage loans for home purchases or refinancings, totaling $27 million in mortgage originations. First-time home buyers will remain a major component of the purchase market, buying about 24 million homes over the next decade.
Those trends would push the nation’s outstanding mortgage debt to $17 trillion in 2013, Nothaft said. Faster home price growth would translate into higher levels of originations and stronger debt growth.
The report didn’t take interest rates into consideration. Rates will fluctuate over the next decade, but housing demand will be driven by factors such as population growth, not interest rates, Fannie Mae Chief Economist Dave Berson suggested.
Other findings also point to a rosy picture of the housing sector 10 years from now.
“You are going to get a bullish forecast from us,” NAR Chief Economist David Lereah said. “And you’re getting it because we’re looking at the data and we’re looking at the data very intelligently.”
David Seiders, chief economist for the National Association of Home Builders, said about two million new housing units will be needed each year to meet demand. Conventionally built single-family homes will account for about 72 percent of total new housing units, an even larger share than during the past decade, he predicted.
Factors that will contribute to that demand will be household growth, along with replacement requirements, second home demand and changes in vacancy. Those will result in a necessary annual production between 1.85 and 2.17 million new housing units. Even the lower end of the range, the study points out, is higher than production levels of recent decades.
The home ownership rate will likely rise above today’s record level and exceed 70 percent by 2013, Lereah predicted. He said home price appreciation should average about 5 percent a year for the next 10 years, but could be more than 6 percent if more constraints are placed on housing supply.
Population growth will create more demand for housing as will people living longer, Lereah said. More retirees will look for second homes and more immigrants will seek to buy homes once they’ve lived longer in this country, he said.
In fact, immigrants will make up a sizeable chunk of the demand for homes, said Paul Merski, chief economist with the Independent Community Bankers of America.
“That’s a real challenge and opportunity for our industry,” he said.
Other challenges that the housing industry faces include the home ownership gap between minority and white households, increasingly stringent local land-use controls that push up house prices and proposed changes in the regulation of the housing government-sponsored entities, including Fannie Mae and Freddie Mac, according to the report.
The Washington, D.C.-based Homeownership Alliance is made up of housing industry organizations, including the five that authored the report.
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