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Major updates improve mortgage projections

Substantial changes in mortgage market predictions are being announced by credible analysts.

For example, the Mortgage Bankers Association released its updated mortgage finance and economic forecasts. The revision included a significant increase in the volume of purchase originations.

MBA now projects that purchase originations will reach $801 billion in 2015 and $885 billion in 2016. That is an increase of $71 billion and $94 billion, respectively, over the association's previous forecast.

Mike Fratantoni, MBA's chief economist, explained the reasons for the update in mortgage projections this way:

"The housing market recovery has shifted to a higher gear. We have revised upward our estimates and forecasts for home sales and home prices, and the cash share of purchases has declined. All of these factors point to higher levels of purchase originations.

"Revisions to our purchase origination forecast in July result from changes in our expectations about the rate at which purchase applications and housing sales translate into dollars of mortgage originations.

"As a result of the changes outlined, purchase originations are now expected to increase to $801 billion in 2015, an upward revision from $730 billion in last month's forecast, and from $638 billion in 2014. For 2016, we increased our forecast to $885 billion in purchase originations.

"More sales are being financed, and more applications are being approved. And we expect that this trend will continue into 2016 and beyond, as the broader economy and job market continue to improve. The stronger job market and somewhat higher levels of inflation will lead the Fed to hike in September, and we expect that mortgage rates will hit 4.5 percent by the end of the year."

Q. How long, on average, does it take to sell a home in today's market?

A. Nearly half of all homes are selling in less than a month, according to a recent study. Nationally, properties typically stayed on the market for 34 days in June, the shortest number of days since the National Association of Realtors began tracking in May 2011.

Short sales spent the most time on the market with a median of 129 days, foreclosures sold in 39 days, and non-distressed homes were on the market for 33 days. NAR reports that 47 percent of homes sold in less than a month in June.

Q. Are applications for mortgages increasing?

A. Yes, at this writing, applications are rising. Mortgage applications increased 4.7 percent from one week earlier, according to data from the Mortgage Bankers Association's Mortgage Applications Survey.

The Market Composite Index, a measure of mortgage loan application volume, increased 4.7 percent on a seasonally adjusted basis from one week earlier. The unadjusted Purchase Index increased 3 percent compared with the previous week and was 23 percent higher than the same week one year ago.

Q. Are rents continuing to rise?

A. Yes, they are rising substantially. The rental market has reached new highs as rental rates continue to surge.

The national annual effective rent growth rate was 5.1 percent in June, a 47-month high for the national apartment market, according to Axiometrics. Effective rent growths have been at least 5 percent for five consecutive months, the longest streak since Axiometrics began its annual tracking of annual apartment data in April 2009.

"Rent growth is just shy of the post-recession peak, and the June metrics reflect the continued strength of the apartment market," says Stephanie McCleskey, Axiometrics vice president of research. "The demand for apartments is still strong, despite the record number of new units being delivered this year," as quoted in a report by the National Association of Realtors.

Q. Is the number of underwater homes increasing?

A. The share of homes that are seriously underwater has dropped to a new low. RealtyTrac, a source for housing data, released its second quarter 2015 U.S. Home Equity and Underwater Report, which shows that as of the end of the second quarter there were 7,443,580 U.S. residential properties that were seriously underwater - where the combined loan amount secured by the property is at least 25 percent higher than the property's estimated market value - representing 13.3 percent of all properties with a mortgage.

• Email Jim Woodard at storyjim@aol.com.

© 2015, Creators

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