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54 | Th e M Rep o RT o r i g i nat i o n s e r v i c i n g a na ly t i c s s e c o n da r y M a r k e t ANALYTICS The LaTesT economy Faces Weak Q1 but should improve Stronger dollar, lower exports, and other factors may have played a role. a ccording to the Mortgage Bankers As- sociation's Economic and Mortgage Finance commentary for May 2015 writ- ten by Joel Kan, associate VP of industry survey and forecasts at MBA, economic growth struggled its way through the first quarter. Kan believes that Q1 was mostly affected by the stronger U.S. dollar, lower exports, as well as trade and inventory disruptions on the West Coast. On the other hand, Kan said that low retail sales signify consumers were not spending much in Q1 and a decline in industrial production could be a sign that businesses are not motivated to increase produc- tion and invest. "We still believe that some of these are temporary factors and that domestic growth will pick up in the second quarter, given that the job market remains strong and there has been upward pressure on wage growth," Kan said. "Because rates have been low for most of 2015 until recently, we revised our refinance originations estimate upward for both the first and second quarters due to higher- than-expected MBA issuance data and strong refinance applications in the months of February, March, and April." In his commentary, Kan men- tions that refinances are expected to be $551 billion in 2015, compared to a previously estimated $510 billion. MBA now estimates a total of $1.28 trillion in mortgage originations for 2015, compared to $1.12 trillion in 2014. Purchase originations are expected to increase to $730 billion in 2015 from $638 billion in 2014. "The BEA's advance estimate of first quarter growth was a paltry 0.2 percent, the slowest quarter of growth since the first quarter of 2014," Kan said. "We and others are becoming increasingly skepti- cal that the government's sea- sonal adjustment process is fully capturing typical first quarter weakness. This is another reason we are less worried by slower reported growth in Q1." Although interest rates have been low, mostly placing concern on economic growth, the MBA expects rates to increase through the course of the 2015, and the Fed will raise rates in September as the economy and job market grow stronger. "A strong job market leading to sustained wage growth is a factor that drives household formation and that is expected to pick up this year, providing a lift for housing," Kan said. "We now look to the purchase market to drive the over- all housing outlook. Rental vacan- cies remain low and rents continue to increase, and with home prices still increasing, it is likely that more buyers and sellers will return to the market in the short term." "However, a differentiated purchase market remains, as higher loan size tiers are growing more rapidly than the lower loan tiers, a sign that entry level and first time buyers still face hurdles," Kan said. "Even though lower rates have brought additional refinance borrowers into the market and caused us to raise our originations estimates for 2015, refinance activity has been extremely low in recent weeks, as mortgage rates hovered around the 4-percent level." new residential sales show continued improvement in Housing Market Midwest and Southern regions see jump, while Northeast and West sales fall. a ccording to jointly released estimates by HUD and the U.S. Census Bureau, sales of new single-family houses in April 2015 increased 6.8 percent from the previous month to a seasonally adjusted annual rate of 517,000 units. The March rate was 484,000 units and is 26.1 percent above the estimate of 410,000 units for April 2014. The median sales price of new houses sold in April 2015 was $297,300, while the average sales price was $341,500. The season- ally adjusted estimate of new houses for sale at the end of April was 205,000, representing a supply of 4.8 months at the cur- rent sales rate. HUD and Census Bureau residential sales data is estimated from sample surveys and are subject to sampling variability as well as nonsampling error, including bias and variance from response, nonreporting, and undercoverage. A full explana- tion of how the data is calcu- lated can be found at The organizations also provide estimates of houses sold and for sale by stage of construction on a seasonally adjusted basis and non-seasonally adjusted basis. The National Association of Home Builders (NAHB) weighed in on the April's increases in home sales in a recent press release. The organization noted that regionally, home sales were mixed, increasing 36.8 percent in the Midwest and 5.8 percent in the South. The Northeast dropped 5.6 percent and the West fell 2.3 percent. "Sales are moving forward and our builder members are telling us they are starting to see more activity as more buyers get off the fence and enter the marketplace," said Tom Woods, chairman of the NAHB and a home builder from Blue Springs, Missouri. Chief economist of NAHB, David Crowe added that, "Following an unusually low sales report in March, [May's] numbers are consistent with other data we've seen recently and indicate a continuing, gradual improvement in the housing market."

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