Posted on 01/24/2004 10:19:42 AM PST by Beck_isright
WASHINGTON, Jan 22 (Reuters) - U.S. mortgage lenders expect business to drop sharply this year from record highs in 2003 despite a recent refinancing boomlet as mortgage interest rates fall to 6-month lows, a trade association said on Thursday.
Slowing business will cause lenders to shed around 65,000 jobs, Mortgage Bankers Association Chief Economist Douglas Duncan said at a briefing. Employment in the industry peaked at near 435,000 during the crest of the refinancing wave in the middle of last year, he said.
"There's no question that the decline in volume will reveal excess capacity," Duncan said. Many of those losing jobs are temporary workers brought to handle the surge of refinancing activity as mortgage interest rates in June dipped to the lowest levels since the early 1960s, he said.
Lending to borrowers with blemished credit is expected to climb this year as lenders look to replace refinance business, he said. The pool of subprime borrowers has grown as bankruptcies and credit delinquency rates have risen, he added.
Fueled by low rates, mortgage borrowing jumped to a record $3.8 trillion last year, but should slip to $2.0 trillion in 2004 as rates rise and refinancing dwindles, Duncan said. Borrowing to buy homes will remain flat despite a slowdown in home sales because house prices will rise, he said.
Housing has been been an pillar of strength through the U.S. economic recession in 2001 and the uncertain recovery that has followed. The sector contributed 33.8 percent to U.S. real gross domestic product growth in 2003 if consumer activity from refinancing is factored in, said Mark Zandi, chief economist for Economy.com.
Despite most analysts' expectations of a slowdown in housing activity by the end of the year, led by the end of the refinance wave and higher interest rates, sales and borrowing have surged recently on a fresh dip in rates.
Interest rates on 30-year and 15-year fixed rate mortgages fell to their lowest levels this week since mid-July, mortgage finance company Freddie Mac said on Thursday.
The mortgage bankers' group reported on Wednesday that applications to buy mortgages jumped to a record last week on a surge in refinance bids. Duncan said on Thursday that a drop in interest rates of 0.40 percentage point tends to relaunch home owners' quests for cheaper mortgages.
Also, the government reported on Wednesday that builders broke ground for new homes in December at the busiest pace in almost 20 years, as the improving economy gave builders confidence in demand.
Optimists and true believers. On all sides of the equation. They're always wrong in real world terms.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.