U.S. Mortgage Market Could Bounce Back in 2015, Experts Say

Mortgage MarketSome of the more astute minds in the world of mortgage analysis chimed in last week, as they looked back on 2014’s rather laggard mortgage business activity. While 2014 was not the best year for the U.S. real estate space, these experts believe things may change for the better in the new year.

Statistics from the Mortgage Bankers Association show that home lending was down 36 percent in 2014, marking the biggest decline on record since 1997. The effect of last year’s market slowdown was especially deleterious for Wells Fargo & Co. (NYSE: WFM), which reported a 50 percent year-over-year decrease in mortgage originations, and JPMorgan Chase & Co. (NYSE: JPM), which reported a loss of 53 percent. However, things might pick up this year, though the going may be rough at first.

According to Moody’s Analytics chief economist Mark Zandi, the worst can be considered over when it comes to the real estate business. “Mortgage bankers will feel a lot better by the end of the year than they do right now,” he posited. “It will be a long, slow climb out, but better days are ahead.” Zandi and other number-crunchers believe that improved wage growth and reduced unemployment would propel the mortgage business to a renaissance of sorts in 2015, as consumers have an easier time qualifying for home loans.

First-time buyers, on the other hand, may return to the market thanks to some recent rule changes from government-sponsored enterprises Fannie Mae and Freddie Mac. The latter hypothesis was made by Fannie Mae chief economist Douglas Duncan, as both Fannie and Freddie will be allowing down payments of as low as 3 percent with these new rules in effect.

Combined mortgage activity, meaning activity for both purchases and refinances, is forecasted to increase by 6 percent year-over-year in 2015, according to the MBA’s latest predictions. Separately, Fannie Mae’s Duncan said that purchase activity may tick up by 6 percent, while refinance activity may drop by 7.1 percent.

Speaking at a conference call with Wall Street analysts last week, Wells Fargo Chief Executive John G. Stumpf said that originations, which were at $1.1 billion last year per the MBA’s stats, may rise to $1.2 trillion for the broader market, as a result of Fannie and Freddie’s new policies and other government-backed reforms. “It got too restrictive and customers who deserved a loan, who wanted to buy a home and could afford it, could not get credit,” he explained. “I don’t want to overstate the amount of those folks, but there was that element, and I think we’ve come to a much better place with regulators, with the industry, and with customers.”

Talking about the variables that resulted in a lugubrious housing market in 2014, Moody’s Analytics’ Zandi said that the ongoing housing recovery was stalled in 2014, due largely to younger consumers holding off on buying a new home. However, as these consumers were mainly concerned about a lack of employment and wage stability, Zandi believes things may change going forward.

“We’re going to see a resurrection in wage growth,” opined Zandi. “That’s going to give potential homebuyers a lot of financial firepower and give them the boost of confidence they need to make a big-ticket purchase like a home.” This was also acknowledged by Duncan, who said that the global economic recession of the late 2000s had an especially tough effect on young people, who “haven’t been in a hurry to move out of their parents’ basement.”