MBA: Slow Growth Still Expected Despite Positive Signs

Washington may have (arguably) successfully avoided 2013's budgetary landmines so far, but the ""Mortgage Bankers Association"":http://www.mbaa.org/default.htm (MBA) reports everything it has seen so far suggests economic growth will be modest in 2013.

[IMAGE]

In its most recent ""Economic and Mortgage Finance Commentary"":http://www.mortgagebankers.org/files/Bulletin/InternalResource/83150_.pdf, the association forecasts slow economic gains in the first half of 2013 ""as the effects of the payroll tax increase and the spending cuts from sequestration or a similar decline in government spending kicks in.""

As a result, the MBA projects a 0.9 percent increase in real GDP in the fourth quarter of 2012, resulting in a 1.8 percent average quarterly growth for the year. GDP growth is expected to accelerate--albeit modestly--throughout 2013 and 2014, reaching quarterly averages of 2.0 percent and 2.5 percent, respectively.

Meanwhile, residential investment is expected to stall after reaching an anticipated annualized growth rate of 20.6 percent in Q4 2012. According to the MBA's predictions, residential investment growth will nearly halve in the first half of 2013 (dropping to an annualized rate of 10.6 percent in the first quarter and 7.9 percent in the second) before slowly climbing back up (until the last quarter of 2014, when it is expected to drop to 8.0 percent).

In the mortgage arena, expectations for long-term interest rates have been shifted up to reflect ""minutes"":http://www.federalreserve.gov/monetarypolicy/fomcminutes20121212.htm from the ""Federal Open Market Committee's"":http://www.federalreserve.gov/monetarypolicy/fomc.htm (FOMC) December meeting, which revealed most members favor reducing the ""Federal Reserve's"":http://www.federalreserve.gov/ asset purchasing programs by the end or even the middle of 2013.

Housing is also looking positive at the moment, ""with home sales continuing on an upward trend, purchase applications showing small but steady year over year growth, and refinance activity starting to rebound after a holiday-driven dip."" Most encouraging was the increase in starts: Single-family starts saw an increase of 23 percent throughout 2012, while multifamily starts rose 38 percent--a trend that ""is likely to continue into 2013 as housing permits also continued on a healthy upward trajectory.""

The MBA's forecast for originations was mostly unchanged from its previous expectations. The group estimates mortgage originations totaled $1.7 trillion in 2012 and will decline to $1.4 trillion in 2013 as rates rise and refinances lose steam.