The Mortgage Bankers Association on Wednesday said the housing market recovery has shifted to "a higher gear," and it raised its forecasts for total originations and home purchases for this year and 2016.
The trade group now expects total originations to jump 23% to $1.35 trillion in 2015, due to a surge in home purchases and refinance volumes that are still strong. The earlier forecast was for a 14% increase, to $1.28 trillion.
Total mortgage originations, which are made up of home purchases and refinances combined, are still expected to fall in 2016. But the MBA upped its forecast to $1.26 trillion in 2016 instead of $1.17 billion.
The biggest upward revision came in the outlook for home purchase volume for this year, which the trade group now expects will jump 25% from last year, to $801 billion. The MBA had previously forecast a 14% increase in home purchases, to $730 billion. For 2016, purchase volume is now expected to rise 10.5% to $885 billion; it had previously projected $791 billion.
The MBA's expectations for refinance volumes did not change. Rising interest rates in the second half are expected to keep refinances in check. Still, refinance volume is expected to be $551 billion in 2015, a 14% jump from $484 billion last year. Refinances are expected to decline 31% to $379 billion in 2016, the MBA said.
Mike Fratantoni, the MBA's chief economist, said the revisions to home purchases came from changes in expectations in the rate in which mortgage applications are converting to actual loans, known in the industry as pull-through.
"Overall, we believe that pull-through rates have increased, reflecting incremental but important changes in borrower behavior and lender underwriting practices, as well as changing average loan sizes and falling cash shares," Fratantoni and two other MBA economists, Lynn Fisher and Joel Kan, wrote in a July economic commentary published Wednesday.
