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""PMI Mortgage Insurance Co."":http://www.pmi-us.com is tempering its expectations for the housing market. Although the industry is finally beginning to see some light through the debris of the national mortgage crisis, the California-based company says 2010 has gotten off to a slow start, putting the brakes on any projections for a swift recovery.
[IMAGE]In its March 2010 ""Housing & Mortgage Market Review"":http://www.pmi-us.com/PDF/mar_10_pmi_hammr.html, PMI pointed out that the administration's original first-time homebuyer tax credit pulled sales forward into the months before it expired in November, and January continued to show considerable payback. In addition, the company says, worse-than-normal winter weather has depressed home sales even more.
""As a result, 2010 home sales are starting the year in a significant hole,"" PMI said in its report.
The company's analysts say leading indicators of home sales have been mixed so far, suggesting no significant move in sales is imminent. They note that the recent modest gains in purchase applications, as ""reported by the Mortgage Bankers Association"":http://dsnews.comarticles/mortgage-applications-increase-as-purchase-activity-soars-2010-03-31 might presage an increase in home sales in March and April, but ""the overall view of near-term sales from all [market] indicators isn't very positive.""
Still, with the new tax credit, continued low mortgage rates, and as the economy continues to expand, PMI says home sales should grow again deeper into the year.
[COLUMN_BREAK]The company projects existing home sales to climb from 2009 levels by 6.6 percent to 5.50 million units and new sales by 22.3 percent to 455,000 units. But these projections are down modestly from PMI's prior forecast as a result of the surprisingly weak home sales data for the first part of 2010.
""The continued oversupply of homes on the market still weighs on house prices, although the pickup in sales over much of the past year has tempered this,"" PMI noted in its report.
The company says there are likely to be some seasonal price declines in the winter months, some of which have already been reflected in recent data, with prices falling modestly in the first quarter.
According to PMI, ""Stronger sales and reduced inventory over the second half of the year should allow prices to be about unchanged over the course of 2010.""
PMI's analysts aren't buying in to some market fears that mortgage rates will spike now that the Federal Reserve's purchase program for mortgage-backed securities (MBS) has come to an end, particularly because the Treasury has been very vocal recently about its continued support of the GSE MBS market, and thus the stronger implicit guarantee behind it. PMI projects a rise in 30-year fixed mortgage rates to around 5.60 percent by the end of 2010, compared with 6.00 percent in the company's prior forecast.
The company has also reduced its projection of 2010 mortgage originations to $1.64 trillion as a result of the lower level of home sales anticipated.
""On the other hand, we now expect an upwardly revised $1.74 trillion in originations in 2011, as the swings in sales from the tax credits and bad weather end up pushing the expected increase in purchase originations outward a quarter or two,"" PMI said in its report.
In addition, the company says the lower level of mortgage rates that it foresees for this year suggests that the projected decline in refinance activity should be less than previously estimated â€" falling from 2009's 66 percent to 50 percent in 2010. PMI's previous forecast has put the refinance share of the market at 46 percent.
